News and analysis on the global poultry
and animal feed industries.
on June 23, 2009

Stable or lower prices by the end of 2008

Common sense and past experiences dictate things will get better

Record high feed, transportation and end product prices place forecasters in an unbelievable territory. Two months ago, who would believe prices would be this high?

So what's next? Either prices will go higher caused by poor growing conditions in the USA and/or increased world demand for energy; or, they might be lower in early May when this was written. Flip a coin.

Historical data does not help with forecasting when prices surge like they have since late 2007. So I rely on knowledge gained from past experiences and common sense. My guess is that very favorable prices have held long enough for more production to occur. This is for world energy and crops. Therefore, unless weather is abnormal, prices will be stable or lower by the last half of 2008.

January-April beef production was up 4 percent and pork 11 percent from a year ago. Broiler production was up 5 percent as well as turkey. Thank goodness exports were strong with a growing global appetite for meat. Wholesale prices responded to the increased production costs but not enough to totally compensate. So to get meat supply in line with the added cost, the meat industries began to reduce production. If costs continue to increase we could have less meat per capita by fourth quarter than in 2007, which I doubt will happen. Poultry industries could reduce supply by fourth quarter.

The surge in food prices is primarily caused by high fuel prices. In recent years, tremendous growth in economic wealth in China and India has pushed many from the lower class into the middle class. They, of course, want more of everything which has pushed demand up faster than supply was made available. Supply and demand at work.

Latest estimate of world coarse grain supply shows a 4 percent increase now, but a 7 percent decrease in ending stocks in 2007-08. A big crop is needed. World oilseed supply is expected to be down 2 percent with a 22 percent decrease in ending stocks. The U.S. oilseed supply could be down 12 percent with a 68 percent slippage in ending stocks. Acreage planted to each crop will be reported by USDA on June 30. Sometimes this report is a market-mover.

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