US poultry sector braces for higher feed costs

 

 

The US poultry sector is bracing itself for higher grain costs, as rains in the Midwest grain belt delayed crop harvesting.

 

The delayed harvests have pushed corn prices toward US$4 per bushel in recent days, up from US$3 a few weeks earlier amid hopes of a bumper crop, said Frank Jones of Performance Poultry Consulting in Springdale.

 

This is the slowest harvest in three decades, with just 30 percent of soy and 20 percent of corn harvested at this late date, said Brandy Carroll, market analyst with the Arkansas Farm Bureau in Little Rock.

 

Heavy spring rains had postponed planting, and an early frost, rain and chilly temperatures threaten the yield and quality of both corn and soy - helping to push commodity prices higher, said Carroll.

 

The anticipated bumper crop is turning into a decent harvest, heaping more pressure on operating margins for chicken companies, said economist Paul Aho.

 

Smaller processors will likely feel the sharpest pinch and growers will be squeezed by integrators tightening their purses, said Jones.

 

He noted that it does not mean large processors will have an easier time, as the next year would not be a good time for expansion or extra spending.

 

Chicken companies have lost an average of four cents per pound processed in October, according to Stephens Inc. Stephens noted negative processing margins for the industry since August.

 

Meat companies are also battered from weaker consumer demand and sluggish restaurant sales expected to persist well into 2011.

 

In the meantime, soymeal prices have also jumped 10 percent this month.