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Is Chicken Helping Out Beef Prices?

It sounds like an oxymoron but the poultry industry may actually help beef prices rise this next year. The fact is that the high price of ethanol-based corn has hit the poultry industry much harder than the beef industry. Cattle have options to grain; poultry don't.

For instance, Tyson recently reported a 54% drop in quarterly profits due to higher feed costs. And, projections are for poultry production to decline by 4% next year, as that industry adjusts to higher corn prices. In fact, Tyson's feed cost in 2011 increased by $675 million compared to last fiscal year, which puts its feed costs at over $4.5 billion next year. Tyson's poultry division also saw a profitability swing of more than $200 million on a year-to-year comparison for this last quarter!

The good news is that the total meat protein supply is expected to decline by 2-3% in 2012. Despite the astronomical increases in feed prices, Tyson and others are still expecting to remain profitable, if not as profitable as previously, as prices move higher as a result of tighter supplies.

The market continues to be powered by declining supplies and increasing export demand. If we can ever get the domestic market to respond, we should be on really good footing. With December 2012 corn hitting new recent lows and coming in at $5.50/bu., there is good reason for price optimism in 2012 beyond the first quarter.

TAGS: Marketing