Blog for Rural America

The Center for Rural Affairs, a private, non-profit organization, is working to strengthen small businesses, family farms and ranches, and rural communities. Permission to reprint items from this web log is hereby granted, on the condition that clear credit is given to the original source of the material. If the blog provides information for a story, please let us know by sending an email to johnc@cfra.org.

Thursday, March 29, 2007

Industrial Livestock and Low Feed Prices

Industrial Livestock Companies Gains from Low Feed Prices

by Timothy A. Wise and Elanor Starmer, Tufts University - Tim.Wise@tufts.edu

With rising demand for corn-based ethanol, representatives of many of the nation’s leading meat companies have expressed concern over the rising price of animal feed, which has increased significantly with the price increases for its two principal components, corn and soybeans. Feed prices have indeed increased significantly. As feed costs generally account for more than half of operating costs for industrial operations, higher prices can have an important impact on the bottom line for these companies.

So too can low prices. Any discussion of today’s high prices should take into account the extent to which these same firms have benefited from many years of feed that was priced well below what it cost to produce. In the nine years that followed the passage of the 1996 Farm Bill, 1997 - 2005, corn was priced 23% below average production costs, while soybean prices were 15%
below farmers’ costs. As a result, feed prices were an estimated 21% below production costs for poultry and 26% below costs for the hog industry.

We estimate cumulative savings to the broiler chicken industry from below-cost feed in those years to be $11.25 billion, while industrial hog operations saved an estimated $8.5 billion. As we show below - http://www.ase.tufts.edu/gdae/Pubs/rp/CompanyFeedSvgsFeb07.pdf - the leading firms gained a great deal during those years from U.S. agricultural policies that helped lower the prices for many agricultural commodities...

--- editor's note... this excerpt is from a short paper from Tufts University's Global Development And Environment Institute... you can view the entire paper at the links above or under the title of this post

Agree? Disagree? Post a comment here or contact John Crabtree, johnc@cfra.org

Center for Rural Affairs
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