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AFIA: feed prices will increase more

20-03-2008 | |

Consumers will see another major run-up in food prices this summer due to the competition for raw materials, the American Feed Industry Association (AFIA) board of directors was told at its recent meeting.

AFIA President & CEO Joel Newman, in his state of the
industry report to the AFIA board, said Congress and the Bush Administration
must recognize that $5 a bushel corn – and similar price jumps for soybeans and
other food grains — can no longer be viewed as anomalies or temporary. “$5 corn
looks to be closer to the new ‘normal,” Newman said, adding ethanol’s use of
corn will hit 27% of the U.S. corn crop during the 2007-2008 crop year.

The AFIA Board was
told the average 5% increase in consumer food prices experienced last year is
just the beginning, with food prices likely jumping another 10-12% this year.

“The industry’s cost of production escalation has only just started to
work its way through the system. Feed price increases will be pushed through the
food chain over the next six months,” Newman said, “Consumers can expect to see
even higher prices for meat, poultry and dairy products.”

Newman laid
out the “perfect storm” of factors forcing food prices higher, starting with
crude oil prices topping $100 a barrel and increasing demand for alternative
fuels. Couple that demand surge with the effect of global livestock liquidation,
particularly in the swine industry, increasing export demand for U.S. grains and
oilseeds to meet stronger global demand for animal protein, an 11% increase in
world feed production – which has led to record low U.S. stocks-to-use ratios –
combined with a weak U.S. dollar and significant increase in ag commodity
speculators, and you have the inevitable pressure on U.S. food prices, Newman
said.

Supporting the AFIA internal
analysis is a report released this week by the Coalition for Balanced Food &
Fuel, of which AFIA is a member. In his report, presented at the Annual Meat
Conference this week in Nashville, TN, Dr. Tom Elam, president of Farm Econ, an
analysis firm, said he estimates the cumulative costs to the food industry of
the federal renewable fuel program will be about $100 billion for 2005-2010.
Elam said broiler industry input costs this year are up $3.4 billion (53 cents
per bird); turkey input costs are up $646 million ($3.40 per turkey); swine
input costs are up $2.9 billion ($38 per hog); cattle input costs are up $2.24
billion ($117 per fed beef animal) and dairy input cost are up $2.7 billion.

Related website:
AFIA   

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