Bumper corn crop doesn’t equal lower chicken prices

This year's feed costs will likely be the lowest since 2006. Does that mean cheap chicken?

Matt Beeson Author Headshot
The crop years 2003-04 and 2009-10 show that bountiful corn crops don’t necessarily lead to cheap chicken prices.
The crop years 2003-04 and 2009-10 show that bountiful corn crops don’t necessarily lead to cheap chicken prices.

The U.S. Department of Agriculture (USDA) surprised the market with the forecast of huge (record by almost 4 bushels per acre) corn yields in this year's crop. Although not in the bin, it is great news for livestock producers. Feed costs will likely be the lowest since 2006. Does that mean cheap chicken?

Meat buyers say, “Cheap feed eventually equals cheap meat!” Academically, it is a simple argument. Lower costs improve returns and result in expanded meat production, which leads to lower-cost meat. It is a long trail, but it ends with a conclusion that is easy to defend. Data, however, suggests that this is not always the case.

Let’s test the assumption made between supply, demand and prices. The table, which shows the record corn yield years since 2000, could be challenged as overly simplistic, but it is a basic test of the “cheap feed equals cheap chicken” theory. It summarizes the price of breast meat the summer before the harvest, the summer after the harvest, and the percentage change in price.

Looking at the summer prior to crop year 2003-04, breast meat averaged $1.75 per pound. The summer after the record yields, prices averaged $2.22. Despite the very good corn crop, pricing increased 27 percent. This example isn’t isolated; a similar increase can be seen with the 2009-10 crop year.

The data suggest little can be said about the future of chicken prices simply because the corn crop is a good one. Meat buyers will argue the case, but the data does not support the assumption that a big corn crop results in cheap chicken prices.

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