Posted: Sunday, January 6th 2013 at 1:13pm
Higher corn prices hit stores, chicken farms
By The Associated Press
"Pain is the right word," said Tom Hensley, president of Habersham County-based Fieldale Farms. Fieldale spent an extra $50 million on chicken feed last year. "We now have more days between flocks which means, over the course of a year, we make less money. And the price of beef and chicken is at an all-time high." (File photo)
On Nov. 11, the Desert Condor steamed into the port of Brunswick and unloaded 40,000 tons of Brazilian corn --- the first time corn has ever been imported into Georgia.
The ship's arrival, followed a month later by the Genco Predator, underscores how last summer's severe Midwestern drought sent prices skyrocketing and hurt industries --- North Georgia poultry, in particular --- that use corn as a raw material. Chicken growers, producers, retailers and consumers suffered the higher prices.
"Pain is the right word," said Tom Hensley, president of Habersham County-based Fieldale Farms. Fieldale spent an extra $50 million on chicken feed last year. "We now have more days between flocks which means, over the course of a year, we make less money. And the price of beef and chicken is at an all-time high."
Yet earlier predictions of massive losses in revenue and demand didn't materialize. Widespread layoffs or farm failures didn't happen. Hensley, like other so-called poultry integrators, cut production to drive up demand. Fieldale will make a little money this year.
(The "dean" of the Georgia poultry industry, Abit Massey, former longtime president of the Georgia Poultry Federation, in a speech in Gainesville last November, addressed corn prices and other things that are currently having a negative impact on the state's poultry industry. See earlier story. Link below.)
Inventories of corn remain at historically low levels. The push for more ethanol made from corn exacerbates supply troubles. And another nasty drought in the nation's breadbasket could readily turn this year's fear into next year's reality.
"Right now the industry is sort of moving sideways and hoping that adjusted supply will be in better balance to demand and they can make a little money," said Bill Roenigk, economist for the National Chicken Council in Washington. "But if you look at next year's weather reports for the Midwest, it's hard right now to be confident that they'll have a good crop."
Farmers planted 96 million acres of corn this year, the most since 1937. In the spring, the per-bushel price of corn was about $5. Then the rain stopped, crops withered, farmers harvested only 88 million acres and the price rose to $8.50.
Agribusiness giants like Archer Daniels Midland and Bunge, which handles grain operations at the port of Brunswick, realized it was cheaper to import corn from Brazil than to pay Midwestern prices for chicken, cow and pig feed. The U.S. Department of Agriculture projected imports at a record 1.9 million metric tons, a stunning turnaround for the world's biggest producer and exporter of corn.
Georgia is the nation's top poultry producer with $4.6 billion in sales in 2010, according to the University of Georgia. Roughly 100,000 people work either directly or indirectly in the industry. And 3,800 farms dot the countryside, most in North Georgia.
UGA estimated that higher corn prices cost the chicken processors an extra $430 million this year in feed. Loath to pass along higher prices to consumers, poultry producers trimmed supply. Fieldale Farms, for example, turns 3 million chickens a week into breasts, thighs, wings and nuggets, a 10 percent reduction from last year.
"I try to be optimistic, but it's hard to know what's going on with our government," Chapman said. "I'm not very optimistic about ethanol."
The poultry industry, along with governors of nine states including Georgia's Nathan Deal, beseeched the Obama administration to waive biofuel rules that produce cleaner gasoline but eat up 40 percent of the nation's corn crop. The Environmental Protection Agency denied the waiver. Corn supplies remain tight and prices high.
A year ago, shoppers paid an average of 79 cents per pound for chicken, according to USDA. This year they're paying 85.2 cents. Next year the cost could rise to 92 cents per pound.
"If we have a great corn crop, next year prices will be just high," said Mike Lacy, a UGA professor of poultry science. "If we have a bad corn crop next year prices will be horrendously high."
(AccessNorthGa.com's Ken Stanford contributed to this story.)
Link: 'Triple-whammy' challenges poultry industry
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