October 12, 2010

US corn shortage seen to raise meat prices

A surprise contraction in the US corn supply will push up beef, pork and chicken prices in what parts of the industry warn will be a "game changer."

With the US harvest halfway through, the USDA said the average corn field will yield 155.8 bushels per acre, 6.7 bushels less than its September estimate.

Gregg Doud, chief economist of the National Cattlemen's Beef Association said this is an all-time record change in corn yield from one month to the next. The season-average farm price for corn, an integral part of the diet of protein animals, is projected to rise by 60 cents a bushel to between US$4.60 and US$5.40.

The beef industry is only this year recovering from the commodity price spikes of 2007 and 2008 – events that led to a dramatic diminution of the number of cattle raised for slaughter.

Doud said the spike in corn prices would push the cost of breeding cattle beyond the point where those costs could be passed along to consumers.

The impact on chicken producers was immediate. Shares of Tyson dropped almost 8%, closing at US$15.01 on Friday (Oct 8). However, chickens could grow their "share of stomach" as a result of lean times in other meat industries. Bill Roenigk, an economist at the National Chicken Council, expects the population of broiler chickens (chickens bred for meat) to expand by 3% next year.

Analysts said the price spike would also discourage expansion in the pig industry.

According to reports, the price of beef in the US rose by almost 6% in the three months to August 22. Pork prices jumped more than 8%, while chicken prices rose by less than 2%.