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

Election year helps but prices will still struggle

Most consumers will continue to purchase the food products they want, but in a conservative way.

In general, the U.S. economy is healthy and quite strong. A few soft spots have gotten all the news recently, with real estate going through its first year-to-year decline since the 1930s. Most homeowners have never had their home values deflated before, consequently some were leveraged beyond reality, encouraged by financial institutions. The bubble had to break, and 2007 was the year. This has impacted less than 5 percent of the home owners, so 95 percent are still doing quite well.

This said, most consumers will continue to purchase the food products they want but in a conservative way.

Since 2008 is a national election year, the economy should get a boost; thus food demand will not be as soft as the media expects. However, with 1.8 to 2.2 percent more per capita meat supply in the next seven months, prices will struggle to hit last years record setting levels.

Broiler prices could be hit the hardest in relation to a year ago due to the industry's desire to keep weekly slaughter 3 percent to 5 percent above a year ago. This could keep the seasonal summer values under their normal relationship to spring prices. Exports could be a record, helping domestic prices. If broiler production trends continue through the fourth quarter, per capita use could exceed 2006 record-breaking numbers.

Not so with red meat, as high costs have slowed down feeding of corn, but the continued increase in ethanol production creates DDGS, a great cattle feed. Now if there was a way to economically use DDGS in hog and poultry rations, continued expansion in meat production would be assured.

Early expectations on U.S. planted acreage are more corn, less soybean. Corn yields have increased faster than soybean. This assumes most ethanol plants under construction will be operational by the fall of 2008, using 50 percent more corn than in 2006-07. U.S. farmers could produce 2.5 billion more bushels of corn and maybe 600 million fewer soybean bushels. Remember the world gets two crops of soybeans, so total output will be close to 2006-07 levels. Prices of feed ingredients will be volatile in 2008. Plan on it.

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