Meat producers face record feed prices
Meat producers are braced for a sharp hit to profits after the price of a key ingredient for fattening chickens and pigs hit an all-time high as a result of the intense heatwave in the US farming belt.
Soyabean meal, crushed from oilseed and mixed with corn to make animal feed, on Thursday exceeded the record set during the 2007-08 food crisis. Benchmark CBOT July soyameal futures rose to a record $475 per short ton, up 4.6 per cent.
Other futures markets also surged late in the session. Corn was at its highest in more than a year, with benchmark CBOT July corn reaching $7.76¾ a bushel, up 8.1 per cent on the day. The December contract, against which much of the coming harvest will be priced, hit a peak of $7.13 a bushel, up more than 37 per cent over the last three weeks.
Soyabeans rose to within reach of a record set in July 2008, hitting a session peak of $16.44½ a bushel, up 4.6 per cent.
The jump in prices will hurt chicken processors such as Tyson Foods, Sanderson Farms and Pilgrim’s Pride, which is controlled by Brazil’s JBS. Poultry eat more than 40 per cent of the meal crushed from US soyabeans, according to Bill Roenigk, chief economist at the National Chicken Council.
Meal prices soared along with broader grain markets as drought and temperatures of more than 100F (38C) were forecast to continue in US corn belt states such as Illinois, Indiana and Iowa, threatening crop yields.
Mike Cockrell, chief financial officer of Sanderson Farms of Mississippi, said feed made up 55 per cent of the company’s cost of goods sold. It had locked in soyameal costs only through to the end of July.
“At the end of the day, chickens eat corn and soyabean meal. There are no viable substitutes.” he said. “So we and others in our industry will have no choice but to pay a higher cost to feed our chickens. If history proves a reasonable guide, high-priced grain means high-priced meat at some point in the future”.
“If you know how to do a rain dance, I encourage you to do so,” said Mr Cockrell.