View Full Version : Economics An Ag related outlook story

04-01-2011, 09:11 AM
Excuse the very ag producer targeted story but if you have doubts about food costs for the future....this may help.

Keep in mind it take a long time to move cattle numbers upward (gestation and maturity). Poultry happens very fast with Pork inbetween. The global nature of ag markets is very real.

Corn at $7 the “new norm” for meat industry, Tyson executive says
Bruce Blythe, Business Editor | Updated: March 30, 2011

Livestock feeders face a “new norm” for corn prices at around $7 a bushel, reflecting expensive oil and ethanol industry expansion that ultimately will result in higher costs for consumers at the supermarket meat case, Tyson Foods, Inc., executives said.

Record corn consumption by ethanol makers is pushing up costs for cattle, chicken and hog feeders, Jim Lochner, Tyson’s chief operating officer, said during a March 30 presentation at the J.P.Morgan Global Protein Conference in New York.

With corn prices likely to remain high, the U.S. meat industry is undergoing a fundamental shift in the supply and demand factors that drive production and profit, Lochner said.
“We have to think about covering $7 corn as the new norm,” Lochner said during the conference, which was broadcast over the Web. “And we’ll just have to see how the long-term supply relationship, the price relationship, manifests itself in that profitability.”
“But I think we’re into that new norm with $7 corn, and the strong relationship with corn and crude oil,” he said. Springdale, Ark.-based Tyson is the largest U.S. meat producer.
Click here for a slide show that accompanied Tyson’s presentation.

Tyson took advantage of a drop in corn prices that followed Japan’s earthquake and tsunami earlier this month and secured most of its grain needs through the summer, Lochner said. He also said Tyson hasn’t seen any disruptions to meat shipments to Japan, and that over the short-term, the country may increase purchases.

Corn prices have nearly doubled since the middle of 2010 after the U.S. harvest fell short of expectations and exports increased, cutting supplies to historically-tight levels. Additionally, U.S. ethanol distillers ramped up production to record highs, encouraged by $100-a-barrel oil. U.S. fuel refiners receive a tax credit of 45 cents for every gallon of ethanol blended into gasoline.

The ethanol industry is projected to use about 40 percent of U.S. corn supplies in the 2010-11 marketing year, compared with 12 percent five years ago, according to U.S. Department of Agriculture data.

Increased competition for corn from export markets and ethanol makers has resulted in a “new paradigm” for the livestock industry, with producer profitability determining availability of meat, Lochner said.

“The drivers of profitability and production have changed,” Lochner said. “The old paradigm was that profitability and production are driven by domestic demand. The new paradigm is that they're largely driven by grain costs and exports.”
Overall U.S. meat supplies have declined for at least three years and probably will shrink again this year, Lochner said.

“Total production of major proteins appears to be about flat versus last year, but with extremely strong exports, it's likely there will be even less meat and poultry per capita,” Lochner said

In trading March 30, CME Group corn futures for May delivery fell 8 ½ cents to $6.63 ¼ a bushel, while December futures fell 5 cents to $5.95 ¼. On March 4, corn futures reached $7.35, the highest price since July 2008, based on the contract closest to expiration.
As the largest U.S. chicken producer, Tyson is one of the country’s biggest domestic corn buyers. Earlier this year, Tyson said it expected to spend $500 million more on grain in its fiscal 2011 compared with 2010.

That would be a nearly 13-percent increase over the roughly $4 billion the company spent on grain last year, according to an February estimate by analyst Stephen Share, who’s with Morgan Joseph TriArtisan LLC in New York.

Lochner said the corn market’s decline following Japan’s March 11 earthquake “created opportunities” to buy grain cheaper.
“We did use that in conservative fashion to extend our coverage” into the company’s July-September quarter, Lochner said. “We’re materially covered” for the summer quarter, he said.

Tyson is also a major meat supplier to Japan. Asked about Japan’s meat imports, Lochner said he hasn’t seen any disruptions yet. “In fact, right after (the earthquake), there was a short-term increase in demand and a requirement to try to fill orders more quickly than they were originally destined for,” Lochner said.

While the earthquake and tsunami destruction in Japan may have temporarily hurt meat demand, it also disrupted the country’s domestic food production system, meaning Japan may need to import more.
“We expect that Japan probably will maintain, or potentially in the short run, increase its imports of protein,” Lochner said. “In the short run we don’t look at any damage. In the long run, I think it will be pretty much business as usual.”


04-01-2011, 10:55 AM
I have a client that row crops 20,000 acres in Iowa, all corn. He used to plant soy bean as well but now just corn. Additionally he also has a large amount of acreage in CRP (govt pays him NOT to farm this land).
I review his financials annually and have for the last 10 years or so. Guess what trend I'm seeing?

It's BS. and In Kansas, Mo. Iowas, Illinois, Nebraska, Ohio it doesn't matter republican or democrat it is the good ol boys network and Farm subsidies and food to fuel is going to kill us.

We expend more energy working ground, planting harvesting and converting to fuel than what we gain. Any idiot can figure this out if they look at it, but we can't change shit.

Hog's Gone Fishin
04-02-2011, 03:02 AM
Our politicians SUCK ! They're greedy selfish bastards. Fuck them all !