If the grain harvest is good, there are tantalizingly supportive economic signs for poultry producers.
Will the price of corn be $4 or $10 a bushel by the time the crop is harvested in 2013? Corn prices could be anywhere in that range in the coming year. That’s the almost unbearable financial predicament facing U.S. poultry producers. The degree of uncertainty associated with grain prices recently led one poultry company CEO to observe that luck in the timing of purchases can play a bigger role in a firm’s success than managerial skill.
That’s the financial reality facing poultry producers as the Renewable Fuel Standard sucks over 40 percent of the corn supply out of food and feed production and into energy production, and with corn yields down for the third year in a row and corn ending stocks at their lowest level in 18 years.
What must poultry producers be thinking as they face such uncertainty? Amid recession, which undercut consumer demand for chicken and turkey, and drought, which ruined corn yields and drove feed ingredient costs sky high, and Renewable Fuel Standard mandates, which subverted grain markets and produced huge swings in feed prices, poultry producers lowered production to restore profitability. But, with feed ingredient costs running near 35 cents a pound for chicken and 50 cents a pound for turkey, poultry producers’ financial future is tied to the grain crops as never before.
So, the second half of 2013 and early 2014 could be among the best, or worst, of financial stretches for U.S. poultry producers. If the grain harvest is good, there are tantalizingly supportive economic signs. The U.S. economy appears to be improving, and economists are forecasting that traffic in foodservice restaurants will be up 1.5 percent in 2013. That is a business sector that has been stubbornly sluggish for poultry sales over the last three years. With the supply of meat and poultry reined in for $7-a-bushel corn and $350-a-ton soybean meal, the poultry business could turn very profitable if the grain harvests are bountiful in 2013.