The first good crop year after a drought is usually when livestock and poultry producers recoup the losses they incurred because of high grain prices brought on by the drought. Eventually, cattle herds are reduced and poultry and swine producers also cut back production until meat prices rise to levels that are profitable, even with the high feed costs. Then, after a good harvest, grain prices fall and meat and poultry prices remain at elevated levels until herds and flocks are increased to take advantage of the favorable prices and costs. The lag time from when grain prices fall and when production ramps up is generally the most profitable time to be in the meat and poultry business.
Lower costs and higher prices
Speaking at WATTAgNet.com’s 2014 Grain and Meat Outlook webinar, Dr. Thomas Elam, economist and president, FarmEcon LLC, said that the US cattle herd will take years to recover and that Porcine Epidemic Diarrhea virus (PEDV) is limiting US swine producers’ ability to increase production, and these two facts provide a unique opportunity for poultry producers. Elam said that he expects beef, pork, chicken and turkey prices to all set record highs in 2014.
In spite of the desire of chicken and turkey companies to ramp up production to take advantage of this window of lower grain prices and high meat prices, Elam said that he doesn’t expect to see broiler and turkey production in the US to increase significantly until the third and fourth quarters of 2014, respectively.
Elam said that the cutbacks made by US broiler and turkey companies in response to tough economic times over the past few years had resulted in a decrease in the size of the grandparent and parent flocks and that this is delaying the industries’ ability to increase chick and poult production. He also said that US exports of turkey and chicken hatching eggs have increased over the last year, further slowing industry efforts to ramp up production.
Will grain prices fall further?
The record corn harvest in the US was large enough to result in a rapid drop in corn prices, unfortunately, the same can’t be said about soybean prices. Tim Brusnahan, vp of consulting and principle, Richard A. Brock & Associates, Inc, said not to expect any lower prices for soybean meal until July or August. With the expected increase in soybean acreage in the US this year, he expects to see a drop in soybean prices as this year’s crop is harvested.
Brusnahan forecast a farm price for soybeans of $9.00-10.50 per bushel in the 2014-2015 crop year, down from an expected $12.25-13.25 range in the current crop year (2013-2014). If the US experiences an average yield for corn this season (2014-2015 crop year) of 163 bushels per acre, Brusnahan said that the farm price for corn will be in the $3.85-4.60 per bushel range, which would be slightly lower than the forecast range of $4.20-4.70 for the 2013-2014 crop year. He said that there is a good chance that we may not see the low price for corn for the 2013-2014 crop year until July or August of 2014.