Gordon Butland
In the past 4 to 5 months the industry has been globally grappling with the
short and long term consequences of the USA ethanol programme. On one side the
livestock industry was predicting disaster while the corn growers were
reassuring all that there would be no problems as increased supply would resolve
the issue.
In the past 4 to 5 months the industry has been globally grappling with the
short and long term consequences of the USA ethanol programme. On one side the
livestock industry was predicting disaster while the corn growers were
reassuring all that there would be no problems as increased supply would resolve
the issue.
Increased production of corn
After an initial surge, prices have dropped off their highs
as the production of Brazil and Argentina will be up by about 14 million metric
tons on last year and local prices in Brazil are close to US$ 120 per MT.
As was to be expected a certain amount of substitution has occurred in the
feed formulations leading to a lower corn usage in many places. Also an increase
in the planted area in the USA has also eased the pressure on prices.
Evaluating poultry costs difficult
This complex and constantly changing scenario for grain
makes it difficult for poultry producers to evaluate the probable costs and
consequent pricing strategies in the short term.
The US industry has increased prices by about 40% compared to 2006, although
corn is not the only contributing factor. Retail and export prices in Brazil
have also moved up but so far prices in Europe have not reacted.
Strong euro and pound sterling
The final cost of imported meat into Europe is actually
lower than a year ago even though Brazilian export prices are higher. A stronger
Euro and pound sterling allied to lower duties as a result of lower tariff
salted product again being allowed is causing this. So for the two principal
western hemisphere producers and exporters there is more good news than
bad.
Corn prices rise in Asia
In Asia the price of corn has risen to about US$ 230 per MT, affected by high
freight rates on top of the corn issue. Even where there is local production,
prices are put at an import parity, causing problems for poultry producers in
the region who have difficulties to increase prices on domestic markets that are
limited by the purchasing power of the population.
The favourable market conditions that currently exist should not fool the
poultry industry into thinking that there has been much fuss about nothing.
Lower usage through creative formulations has its limits and crops will not
necessarily increase yearly by over 20 million metric tons which is what the
ethanol expansion will call for.
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