What business worries keep poultry producers awake at night? Is it the $8-a-bushel corn prices paid during much of the past year? Or is it the challenge of managing risk when prices are extremely volatile?
Lampkin Butts, president and chief operating officer, Sanderson Farms, says worry is counterproductive — being prepared is the key thing.
“You just have to be prepared to deal with the prices that come along. Because our business is cyclical it is important to have a strong balance sheet. So you don’t stay awake at night worrying about this. You weather through the economic storm,” he told listeners at the Chicken Media Summit .
“In early spring of 2012 everybody was optimistic that the industry was going to get some relief from high corn prices,” he said. “Then by June, there was the drought in the Midwest and the corn crop did not materialize. Instead of 164 bushels per acre, the corn yield ended up being 124. And we were right back to expensive grains.”
There are things, however, that can quicken a poultry producer’s optimism or, on the other hand, just plain get under his skin.
On the plus side, there’s bound to be favorable corn-growing weather and an uptick in the general economy in the same year at some point. When this occurs, there will be a profitable run for the meat and poultry industries.
“There is going to be a late corn planting this year, because there has been a lot of late snow and late winter in some corn growing regions,” he said. “We will see what develops.”
It’s one thing to live with the vagaries of weather but something quite different to be on the wrong side of governmental policy. Namely, the government’s intervention in corn markets that favors the use of corn by the ethanol industry over that of the other uses like meat and poultry production.
“This industry understands competition, but we would like for it to be on a level playing field,” Butts said. "We would like to have the market determine where the corn supply is used," he added.
Whether the industry gets relief from high corn prices in 2013, the Renewable Fuel Standard has cost the industry billions of dollars in incremental feed ingredient costs and consumers billions in added food costs.