News last update:6 Aug 2012

Thanksgiving turkey becomes expensive

Thanksgiving turkeys and Christmas hams could become extremely expensive this year now floods have destroyed an estimated 2 million or more acres (800,000 ha) of corn and soybean fields in Iowa, Indiana, Illinois and other key growing states, sending world grain prices skyhigh on fears of a substantially smaller corn crop.

"We're in survival mode now," said Paul Hill, chairman of West Liberty Foods, a turkey processor based in West Liberty, Iowa. He estimated US turkey producers will reduce their flocks by 10 to 15% nationwide, a cutback that will send consumer prices dramatically higher.

Due to the high feed prices pig farmers have to cut back on the number of animals that they raise. "The cost of Thanksgiving and Christmas turkeys will go up this year, and maybe even more next year," said Hill, who is also the chairman of the National Turkey Federation.

If corn were to rise to $10 a bushel, Richard Lobb, spokesman for the National Chicken Council, said recouping costs through higher retail prices may not be possible. 

"Can you possibly charge enough for the chicken to recoup that investment?" he said. "That's a question no one can answer yet because it's never been done." Rod Brenneman, president and chief executive of Seaboard Foods, a pork supplier in Sawnee Mission, Kansas, that produces 4 million pigs a year, said this will cause meat prices to rise later this year and into 2009.

Pig feed costs up $30
Brenneman's cost for feeding a single pig has shot up $30 in the past year because of record-high prices for corn and soybeans, the main ingredients in US pig diets. Passing that increase on to consumers would tack an extra 33 cents per kg onto a pork chop. In the beef sector it is the same story. US beef producers now spend 60-70% of their production costs on animal feed and are seeing that number rise daily as corn prices hover near an unprecedented $8 a bushel, up from about $4 a year ago.

Before the floods, corn farmers were enjoying record profits selling the grain to feed animals and for use in cereals and as a sweetener in soda and candy. But a sharply smaller corn crop could wipe out those gains.

In Iowa, the No. 1 US corn grower, floods inundated about 9% of corn crops, representing about 1.2 million acres (485,000 ha)  — almost 1.5% of the country's anticipated harvest. In Indiana, another 9% of corn and soybean crops were flooded, potentially costing farmers up to $840 million in lost earnings, according to Indiana Agriculture.

Floodwaters also tossed farm equipment, sprayed cornfields with debris and silt and sucked away large chunks of topsoil. For livestock owners and meat producers, the damage may be felt long after the corn grows back.

Dairy prices will rise
Higher feed prices will eventually filter through to the cost of dairy products too, since 65 to 75% of a dairy farmers' production costs are for feed.

With the cost of animal feed only going higher, many poultry and dairy farmers are starting to look for cheaper alternatives. Farmers buy some of the byproducts of cereal or flour production, but they're not nearly as productive compared to corn.

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