The Stanly News and Press (Albemarle, NC)

October 12, 2012

The drought is costing us big bucks

Eugene Pickler

Friday, October 12, 2012 — Did you know meat prices are going up? I haven’t reached that conclusion by looking at prices in the stores. This conclusion is the result of knowing about feed costs to produce the meat.

The drought in the Midwest has cut corn and soybean production in the U.S. enough to significantly raise the price of these grains in the entire world. For North Carolina crop farmers who did not experience the drought, the price increases in corn and soybeans has meant substantially higher incomes. However, for the poultry and hog producers it means much higher feed costs which will have to be covered by selling the meat at higher prices.

To produce a broiler chicken about 10.5 pounds of feed is required. Broiler feed is about 60 percent corn, so it takes about 6.3 pounds to produce one live chicken. When the price of corn goes from $5 per bushel to $7.50 per bushel, corn cost per chicken will increase about 35 cents.

The drought also decreased the production of soybeans and increased the price. Soybeans are a source of protein in poultry and animal feeds. With bean prices higher the soybean meal in the feed will be higher. Add the increased cost of soybean meal and we have another 20 cents per chicken. In addition to the 55 cents per broiler chicken, there are additional feed costs to produce the eggs from which chicks were hatched. When you divide the four pounds of edible meat in one chicken into the additional feed costs, it is more than 15 cents per pound. We will have to pay the price to keep the chicken production going.

In North Carolina, according to the Agricultural Statistical Service of the Department of Agriculture, we produce approximately 800 million chickens per year. We eat about 160 million of these in North Carolina and ship the rest to other states and countries. While producing the 800 million chickens, it will cost 500 million additional dollars just to feed the chickens. If our producers are to stay in business, then they must receive higher prices to recover the additional costs. Without higher prices many producers will be out of business.

A similar situation exists in pork production. In North Carolina we are producing 16 million hogs per year. The feed cost per pound of hogs is higher than chickens because hogs are not as efficient in converting feed to flesh. The cost of growing pork has increased more than 20 cents per pound. Again, we must pay the price or producers will stop growing hogs. Recent news reports have predicted a worldwide shortage of bacon. With higher grain prices fewer pigs are being produced while demand is still strong.

The feed costs to produce choice beef have also risen. Cattle feeding requires more corn per pound of meat produced than either chickens or hogs. As a result we can expect beef prices to increase even more than pork or chicken.

Though most of us are removed from farm production we are subject to changes in food costs due to changes in weather. We may not be farmers, but we are all attached to the farms. Weather is still a big factor in their success. This year we can expect to pay more for meat because too little rain fell on the corn and soybeans in the US.

Eugene Pickler writes a regular column about economics for The Stanly News & Press.