Higher corn prices hit stores, chicken farms

Midwestern drought hurts poultry industry

On November 11, the Desert Condor steamed into the port of Brunswick and unloaded 40,000 tons of Brazilian cornthe first time corn has ever been imported into Georgia.

The ship’s arrival, followed a month later by the Genco Predator, underscores how last summer’s severe Midwestern drought sent prices skyrocketing and hurt industries — North Georgia poultry, in particular — that use corn as a raw material. Chicken growers, producers, retailers and consumers suffered the higher prices.

“Pain is the right word,” said Tom Hensley, president of Fieldale Farms in Baldwin 75 miles north of Atlanta. Fieldale spent an extra $50 million on chicken feed last year. “We now have more days between flocks which means, over the course of a year, we make less money. And the price of beef and chicken is at an all-time high.”

Yet earlier predictions of massive losses in revenue and demand didn’t materialize. Widespread layoffs or farm failures didn’t happen. Hensley, like other so-called poultry integrators, cut production to drive up demand. Fieldale made a little money last year.

Inventories of corn remain at historically low levels. The push for more ethanol made from corn exacerbates supply troubles. And another nasty drought in the nation’s breadbasket could readily turn last year’s fear into this year’s reality.

“Right now the industry is sort of moving sideways and hoping that adjusted supply will be in better balance to demand and they can make a little money,” said Bill Roenigk, economist for the National Chicken Council in Washington. “But if you look at next year’s weather reports for the Midwest, it’s hard right now to be confident that they’ll have a good crop.”

Farmers planted 96 million acres of corn last year, the most since 1937. In the spring, the per-bushel price of corn was about $5. Then the rain stopped, crops withered, farmers harvested only 88 million acres and the price rose to $8.50.

Agribusiness giants like Archer Daniels Midland and Bunge, which handles grain operations at the port of Brunswick, realized it was cheaper to import corn from Brazil than to pay Midwestern prices for chicken, cow and pig feed. The U.S. Department of Agriculture projected imports at a record 1.9 million metric tons, a stunning turnaround for the world’s biggest producer and exporter of corn.

Georgia is the nation’s top poultry producer with $4.6 billion in sales in 2010, according to the University of Georgia. Roughly 100,000 people work either directly or indirectly in the industry. And 3,800 farms dot the countryside, most in North Georgia.

UGA estimated that higher corn prices cost the chicken processors an extra $430 million last year in feed. Loath to pass along higher prices to consumers, poultry producers trimmed supply. Fieldale Farms, for example, turned 3 million chickens a week into breasts, thighs, wings and nuggets last year, a 10 percent reduction from the year before.

Integrators supply growers like Clermont’s Todd Chapman with chicks and feed. Chapman, who handles 300,000 chickens at a time, will fatten up the birds and return them to processors seven weeks later. The Hall County farmer typically raises maybe six flocks of birds a year. Now, he’s down to five flocks.

“I try to be optimistic, but it’s hard to know what’s going on with our government,” Chapman said. “I’m not very optimistic about ethanol.”

The poultry industry, along with governors of nine states including Georgia’s Nathan Deal, beseeched the Obama administration to waive biofuel rules that produce cleaner gasoline but eat up 40 percent of the nation’s corn crop. The Environmental Protection Agency denied the waiver. Corn supplies remain tight and prices high.

In 2011, shoppers paid an average of 79 cents per pound for chicken, according to USDA. Last year they paid 85.2 cents. This year the cost could rise to 92 cents per pound.

“If we have a great corn crop, prices will be just high,” said Mike Lacy, a UGA professor of poultry science. “If we have a bad corn crop (this) year prices will be horrendously high.”

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