December 18, 2020
12% higher feed costs await US animal producers, analysts say
US animal producers could expect an average increase of 12% in feed costs in 2021 due to higher corn and soymeal prices, CoBank analysts say, Capital Press reported.
According to Will Sawyer, lead animal protein economist with CoBank's Knowledge Exchange division, with corn futures above US$4 per bushel and soymeal futures about US$350 a tonne, producers face record-high prices.
He adds that feed costs have been relatively low since 2012 and lower than the previous year for six of the last eight years. But supply and demand are driving an increase now, with a lot of similarities to what drove increases in 2007 and 2011.
As China rebuilds its swine herd, a threefold increase in corn imports is expected this year, Sawyer says.
On the supply side, La Nina in South America is expected to create drier conditions in key regions of Brazil and Argentina, which are major corn and soybean exporters to China, he says. And drought conditions in the US are complicating things.
"All that adds another US$1 a bushel to corn prices," Sawyer points out.
In 2021, CoBank expects US swine producers to face the highest average increase of 14%, followed by cattle feeders at 13% and chicken producers at 11%. The effect will be felt most next summer when the overall feed costs rise 18% in the second quarter and 16% in the third quarter, representing a significantly higher level of inflation than seen in the last ten years.
Chicken feeders are already experiencing feed cost inflation with a 4.4% increase in the fourth quarter compared to 2019. The increase will begin to be felt by the cattle and swine sectors in the first quarter of 2021.
However, there is some optimism that producers and processors may benefit from higher beef, pork and poultry prices to cushion feed costs, Sawyer says.
Overall meat production is forecast to grow only 0.8% year-over-year. COVID-19 vaccine distribution will ramp up, meat plant operations would be more secure and plant costs will be lower than they were last spring, Sawyer adds.
