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 recognise that
US$5 a bushel corn - and similar price jumps for soybeans and other food
grains - can no longer be viewed as anomalies or temporary. "Five dollar
corn looks to be closer to the new 'normal," Newman said, adding ethanol's use
of corn will hit 27% of the US 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 US
grains and oilseeds to meet stronger global demand for animal protein, an 11%
increase in world feed production - which has led to record low US stocks-to-use
ratios - combined with a weak US
dollar and significant increase in ag commodity speculators, and you have
the inevitable pressure on US 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 programme
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.