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News and analysis on the global poultry
and animal feed industries.
on June 24, 2009

Broiler meat production will fall

USDA projections show the first industry drop in 33 years, partly due to feed costs.

If current USDA projections hold, something will happen next year that hasn't happened in this country in more than 33 years: the production of broiler meat will drop. According to department analysts, broiler meat production next year will be around 36.3 billion pounds, down almost 1 percent from this year.

Not since 1975 have we seen a year-over-year decline, when broiler meat production was 0.2 percent below the previous year. The median annual increase in broiler production has been over 4 percent since that year.

This year, production is expected to be up 2.4 percent over last year. Indicators confirm that announced cut backs are being translated into operational reality. High feed costs coupled with unusually high price volatility for corn is making it a challenge for the broiler industry to have a soft landing during this stressful time.

After touching $8 per bushel in midsummer, by Labor Day corn was selling on the Chicago Board of Trade for around $6, then add 50 cents or more for transportation to feed mills. Companies simply could not pass along $8 per bushel corn, and are having a hard time with $6, considering that the historical average was something like $2.40. The questions are Is corn going to settle in at $5 or $6, or are we looking at something worse? And what can be done to get feed grains to move back toward historical averages?

The biofuel rush

The root of the problem is the federal government's misguided corn-for-ethanol program. I do not believe that Congress set out to wreck the meat and poultry industries. Rather, I think Congress was trying to do something or at least be seen trying to do something about the energy problem. Ethanol was waiting to be boosted into orbit. Congress gave it the rocket fuel of a federal usage mandate and a generous subsidy, and it took off. Hopefully, the government will bring the program back to earth soon. The poultry industry cannot stop pushing for modifications or an end to the subsidies and mandates.

In the meantime, the federal government can soften the impact of the runaway ethanol train. First, help make more land available for corn and soybean production. By most estimates, we need about 5 million additional acres to avoid another huge run-up in the cost of grain. Somehow, farmers found 5 million more acres last spring. Can they do it again?

About 32 million acres are held out of production in the Conservation Reserve Program (CRP). Slightly over 1 million acres will come out this year due to the normal expiration of contracts. Perhaps half a million acres will be tilled for crops. NCC would like to see at least 4 million more acres released without penalty.

A coalition of agricultural groups including NCC has urged the Secretary of Agriculture to permit farmers to exit the CRP early. Another possibility is that land that is not in the CRP, but really is environmentally sensitive, might be put to the plow, such as hilly, easily erodible pasture land.

Time to reconsider

Ultimately, we hope that Congress will reconsider renewable fuels mandates. Ethanol advocates claim that the mandates for corn-derived ethanol are necessary as a "bridge" to other feed stocks, including much-discussed cellulosic sources. Perhaps Congress should move directly to encouraging development of these sources and scale back the use of food-related commodities. If not, I suspect that production of human food will continue to decline. This is a way to put the nation on a diet and lighten its food pocketbook.

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