'New Paradigm' for protein says Tyson COO
Jim Lochner, chief operating officer of Tyson Foods, said a new paradigm exists in the supply/demand fundamentals in US protein production.
"Producer profitability will determine the amount of protein available to be consumed in the future," Lochner said. "That concept hasn't changed; however, the drivers of profitability and production have changed.
"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," Lochner said at the JP Morgan Global Protein Conference.
This shift in input costs began in the mid 2000s, which coincides with the US government's mandate that a portion of the nation's gasoline be mixed with ethanol at a level of 10%. Today, about 40% of the US corn crop is used in ethanol production. This new demand has contributed to historically high corn prices. High input costs, along with increasing global demand for protein, have reduced the amount of meat and poultry available, resulting in higher protein prices for consumers, he added.
"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 while showing a chart illustrating four years in row of declining domestic protein availability.
Source: Tyson Foods
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