News 1 commentupdate:Jul 13, 2011

'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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One comment

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    Christophe Pelletier

    US consumers cannot each much more than they already do. They ingest daily about 50% calories more than nutritional needs are for an average human being. Moreover the American population is aging, and older people eat less.
    With the rise of a middle class in many emerging countries, consumption of meat increases. The markets of the future (and actually of the present) are there.
    With an additional 2 billion consumers in the next 40 years, there are plenty of opportunities for meat producers to develop their business. Since the growth of population will be in countries where water resources are scarce and where the population density is high, it is unlikely that these countries will or should try to produce all their meat. "Empty" countries with ample resources of land, water and raw materials for animal feed will be the places of choice for meat production.
    Another change of paradigm is about price. Cheap meat as Americans have known it for several decades is probably coming to an end. Another new paradigm is going to be "increase meat prices if you want to keep making a profit".

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