The effects of recession and high grain costs on poultry consumption, production

The effects of high grain costs and recession were so great that even poultry consumption dropped. Poultry consumption dropped by 2 pounds over the same period. To find a decline of similar magnitude you have to go back to the early 1970s with the oil embargo, recession and grain crisis.

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Between 2007 and 2012, U.S. per capita consumption of red meat and poultry declined by 17 pounds. As would be expected, the bulk of the decline was in the more expensive and less feed efficient red meats. Red meat consumption dropped by 15 pounds per capita.

However, the effects of high grain costs and recession were so great that even poultry consumption dropped. Poultry consumption dropped by 2 pounds over the same period. To find a decline of similar magnitude you have to go back to the early 1970s with the oil embargo, recession and grain crisis.

After declines of such magnitude, a rebound can be expected. Sooner or later grain prices will fall and economic recession will give way to a better climate for meat production and consumption.

Prospects for lower grain prices  

Although grain prices will never return to the levels of five years ago, the current corn price of $7 per bushel is unsustainable. Corn will eventually fall because at current levels demand is suppressed (lower chicken, beef and pork production, as well as less ethanol), while at the same time corn production is stimulated all around the world.

The only thing holding back a fall in the price of corn is the predicted poor harvest in the U.S. for a second year in a row. By crop year 2012-13 the price of corn should finally fall to $5 per bushel as an average over the entire year. After the last few years, $5 per bushel will seem like a miracle.

Prospects for a better economy  

Although the U.S. economy has made significant progress since 2009, there has been concern recently about the possibility of a double-dip or second recession just a few years after the last recession. The consensus opinion among economists is that growth will be disappointing in 2011 and 2012 but there will be no second recession.

It is taking a longer time than expected to fix the financial system problems of 2008, and new problems with sovereign debt have emerged in Europe. Nevertheless, despite these headwinds, U.S. growth should slowly accelerate in 2012 and 2013.

A bellwether statistic to watch is unemployment. Unemployment, while unusually slow to drop in this current weak recovery will in all likelihood begin to be headed in the right direction in 2012.

Cargill
P.O. Box 9300
Minneapolis, Minnesota 55440-9300
Nutreco
Stationsstraat 77
P.O. Box 299
Amersfoort 3800 AG
NongHyup Feed Inc.
528 Olympic-ro
Kangdong-gu
ForFarmers N.V.
Kwinkweerd 12
Lochem 7241CW
Godrej Agrovet
Godrej One, Pirojshanagar
Eastern Express Highway Godrej One, 3rd floor, Pirojshanagar, Eastern Express Highway, Vikhroli (East)
Mumbai 400079
Wadi Group
Wadi Holding Company Capital Business Park, 26th of July Corridor
Sheikh Zayed, 6th October City, Building B1
Giza
Cherkizovo Group
Lesnaya str. 5B
White Square Office Center, 12th floor
Moscow 125047
BRF
Rua Jorge Tzachel, nº 475
Bairro Fazenda
Curitiba 88301-600
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