Connect with us

Hi, what are you looking for?

Economy

World likely to pay more for meat as food inflation deepens

THERE are signs that the food inflation that’s gripped the world over the past year, raising prices of everything from shredded cheese to peanut butter, is about to get worse.

The coronavirus disease 2019 (COVID-19) pandemic upended food supply chains, paralyzing shipping, sickening workers that keep the world fed and ultimately raising consumer grocery costs around the globe last year. Now farmers — especially ones raising cattle, hogs and poultry — are getting squeezed by the highest corn and soybean prices in seven years. It’s lifted the costs of feeding their herds by 30% or more.

To stay profitable, producers including Tyson Foods, Inc. are increasing prices, which will ripple through supply chains and show up in the coming months as higher price tags for beef, pork and chicken around the world.

Feed prices “go up and down, and you tend to take the rough with the smooth,” said Mark Gorton, managing director at the British chicken and turkey producer Traditional Norfolk Poultry. “But when it rallies as much as it has, it starts to impact massively on the business.”

The last time grains were this expensive was after the US drought of 2012, and meat prices saw a dramatic run-up. Now, meat is again poised to become a driver of global food inflation, and part of the intensifying debate over the path of overall inflation and exactly what central banks and policy makers should do to aid economies still working to recover from the pandemic.

Vaccinations promising a return to normal life and fiscal stimulus programs amounting to trillions of dollars are already expected to unleash pent-up demand and drive a surge in consumer prices. US and European bond markets are sending signals that inflation is back. Americans’ one-year inflation expectations last week rose to the highest since 2014.

As for what’s driving the feed prices, that’s due to bad crop weather shrinking world harvests. Demand is also increasing. China, the biggest buyer of commodities, is scooping up record amounts of the available supplies to feed its expanding hog herds.

Meat producers across major exporting countries are feeling the impact of the higher grain costs. In Brazil, the biggest poultry shipper, the cost of raising chickens jumped 39% last year due to feed, according to Embrapa, a state-owned agricultural research agency. Costs rose again last month by around 6%, said Itau BBA bank.

In Europe profitability of livestock operations has plunged due to the combination of high feed expenses and stifled demand from Covid-19 lockdowns. Some smaller hog farmers may be forced to exit the market, according to Rabobank senior analyst Chenjun Pan.

The United Nations’ Food & Agriculture Organization (FAO) said global meat prices in January climbed the fourth straight month.

Since Dec. 1, corn futures in Chicago have risen 28% and soybeans 18%.

Animal disease outbreaks could also push meat prices higher, with parts of Europe and Asia seeing avian influenza outbreaks. A deadly hog virus called African swine fever is still spreading in some countries after decimating Chinese herds, and recently caused a Philippine hog company to exit the industry.

SHRINKING HERDS
Meat prices at retail grocery stores rise the most after farmers shrink their herds due to declining profits. That’s a process that takes time, which means there’s a lag between the feed-cost inflation and rising consumer prices, said Will Sawyer, animal protein economist at farm lender CoBank ACB.

In the US, livestock and poultry operations have already started contraction due to slim profits amid the pandemic. The American hog herd in December fell 0.9% from the previous year and the cattle herd in January by 0.2%, according to government data.

Cattle profits are already down. CRI Feeders in Oklahoma, a feedlot with 42,000 animals bulking up on corn, is breaking even, said co-owner Scott Anderson. Expanding drought is withering pastures and feed prices have shot up 30%.

The market and weather challenges likely will prompt ranchers to scale back, according to Clayton Huseman, executive director of the Kansas Livestock Association.

“Over the next couple of years, we do expect the supply to get tighter,” Mr. Huseman said. — Bloomberg

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Get the daily email that makes reading the news actually enjoyable. Stay informed and entertained, for free.
Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!

Latest

Economy

PHILIPPINE shares ended higher on Tuesday on data showing higher remittances from overseas Filipino workers (OFW) in March and continued bargain hunting. The benchmark...

Economy

THE PESO strengthened versus the greenback on Tuesday following strong remittance data. The local unit closed at P52.425 on Tuesday, appreciating by 6.8 centavos...

Economy

By John Victor D. Ordoñez A GROUP of taxpayers has asked the Supreme Court (SC) to stop the proclamation of Ferdinand R. Marcos, Jr.,...

Economy

SYDNEY — Philippine president-elect Ferdinand “Bongbong” R. Marcos, Jr. has made a low-key trip to Australia, the Age newspaper reported, bringing some protesters onto...

Economy

Philippine health authorities on Tuesday confirmed the local transmission of a more contagious Omicron subvariant that has become dominant in the US. “There’s local...

Economy

THE DEPARTMENT of Justice (DoJ) has dropped 29 cases from its list of extralegal killings and torture cases for lack of evidence, according to...

You May Also Like

Investing

Having a good Instagram marketing agency to back up your Instagram account is an absolute must going into the new year. With competition stronger...

Economy

Ivermectin, an existing drug against parasites including head lice, has had a checkered history when it comes to treating COVID-19. The bulk of studies...

Investing

Insomnia is the most common sleep disorder in the global population. Therefore, it is a problem that many people suffer or have suffered throughout...

Investing

As a traditionally rigid insurance industry becomes bogged down by antiquated processes and operations, a handful of industry leaders are seeking to shake things...

Disclaimer: SmartRetirementReport.com, its managers, its employees, and assigns (collectively "The Company") do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2021 SmartRetirementReport. All Rights Reserved.