IPPE: The New Normal: $5-plus Corn, $300-plus Soybean Meal

US - The new normal for animal feed costs will be at least $5 corn and $300 soybean meal, according to Thomas Elam of FarmEcon during his presentation on 'The Economic State of the Industry'.
calendar icon 4 February 2013
clock icon 4 minute read

Mr Elam was speaking at the 'Meat and Poultry Research Conference' held at the 2013 International Production & Processing Expo (IPPE). The conference was co-sponsored by the American Meat Institute, US Poultry & Egg Association, the American Meat Science Association and the Poultry Science Association.

Thomas Elam of FarmEcon presenting at the Meat & Poultry Research Conference at the 2013 IPPE.

"Will we see $10 corn and $650 soybean meal?" Mr Elam questioned. "It's very possible. Also, $5 corn and $300 soybean meal is equally probable." But, he believes those are minimums in the future. "We will continue to see volatile feed costs for the next 18-20 months," Elam continued. "There will be no significant change through March and April. Then, it will depend on the weather this summer. If there is no rain again this year, we're in serious trouble. And, there has not been enough snow this winter so far. Then, there is the ethanol squeeze."

From 1950-2005, for meat and poultry producers, consumer demand was the major driver, Elam explained. Now, feed cost is the driver, and consumer demand has slowed. And, it is slowing the recovery from the recession, because more personal income is required for food.

On the positive side, "Exports have held up incredibly well. However, there are always opportunities," Mr Elam remarked. "They include product innovation, distressed asset sales, more flexible price contracts, up-selling export markets, and continued cost cutting for increased efficiency."

Also on the program, Dr David Wicker of Fieldale Farms, discussed antibiotic-free broiler production. "Why do we do it? Because that's what the customer wants," he said. "Antibiotics are not used in the feed or water and are not injected into the egg. We use an all-vegetarian diet, with no meat meals and no animal fats."

Dr Wicker listed several factors that impact antibiotic-free broiler production. The immunity level of the parents is important, particularly the parent hen immunity. The breed strain plays a role, and less density can be another requirement.

Miles McEvoy, with the USDA Natural Organic Program, examined regulatory standards and requirements for natural and organic food production. He said that organic agriculture has grown substantially in the last twenty years, from negligible to $31 billion in 2011. "The reasons vary," he remarked. "Why organic? Things like environmentally sound, biodiversity, less toxic, animal welfare, rural development and economic opportunity."

The 1990 Farm Bill established national organic standards through the Organic Foods Production Act. Mr McEvoy said certification is very important in organic agriculture. Consumers can choose production methods, and it protects consumers, establishes a level playing field, and ensures that products are produced without prohibited methods. It is also scale-neutral, in that all operations must meet the same requirements.

The food production categories that can be certified include crops, wild crops, livestock, and processed products. There is a fee for certification. and the cost depends on the size and scope of the farm. The average is $1,000, and annual re-certification is required.

'Processing Challenges' were addressed by Kevin Myers of Hormel Foods. He focused on natural high pressure processing of ready-to-eat meats to reduce pathogens. He said that high pressure processing has been around 100 years, but has seen rapid growth in the last ten years. He listed the technical differences from other processing techniques. Mr Myers said it also may impact things like shelf life and sometimes flavor but is a viable and growing option.

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