Meat industry leaders warn cutbacks are coming

By Janie Gabbett on 6/19/2008 for Meatingplace.com

Meat industry executives Thursday warned of production cutbacks in the beef, pork and poultry sectors as runaway corn prices have pushed input costs to unmanageable levels.

Citing corn futures prices that point to another 30 percent increase in alreadyescalated feed costs next year, Seaboard Foods CEO Rod Brenneman told reporters on a conference call that sow slaughter will continue and there will be fewer hogs and less pork in the marketplace by later this year.

Calling the effect of the current Renewable Fuels Standard on livestock producers "a classic case of unintended consequences," Brenneman said, "With one bushel of corn, you can produce approximately 20 pounds of pork, or 2.5 gallons of ethanol, but not both."

Mark Hickman, CEO of Peco Foods and chairman of the National Chicken Council, said the poultry industry is entering a second phase of production cutbacks, following a 1 percent to 2 percent cutback in production earlier this year. "We are hearing talk that this was not nearly enough, so liquidation is in round two."

Paul Hill, West Liberty Foods chairman who also heads up the National Turkey Federation, forecast a minimum 10 percent to 15 percent liquidation of the nation's turkey herd in response to higher feeding costs.

"We're in the commodity business. We don't get the privilege of tacking on our costs to the public," said James Herring, CEO of Texas-based cattle-feeding operation Friona Industries. "Operations all over the Texas Panhandle and the U.S. are under these pressures and closing their doors as we speak."

The conference call was part of a meat industry push to get the Bush Administration to suspend the 9 billion-gallon ethanol mandate for 2008 and to reconsider other ethanol-production incentives, including distiller subsidies and tariffs on ethanol imports. (See As flooding continues, meat processors ask EPA to suspend ethanol mandate on Meatingplace.com, June 18, 2008.)

Acknowledging ethanol is not the only factor driving feedgrain prices, the executives pointed out that current ethanol policy was developed when the United States had an oversupply of grain and farmers were getting only about $2 per bushel for their corn. Current futures prices are now pointing to $8 per bushel corn, and current oil prices are nearing $140 per barrel.

"There are not a lot of variables in this world we can control," said Brenneman. "But government mandates are certainly something we can control."