Higher corn prices pluck Georgia poultry farmers

The whopping increase in the cost of feed corn, on top of higher prices for fuel and lower prices for chicken, is making the poultry business a money-losing venture, they said.

"The current financial picture for poultry is as serious as any the industry has faced in recent memory," said  Mike Giles, president of the Georgia Poultry Federation.

Industry representatives said they are not aware of any related layoffs, farm closings or bankruptcies in the state.

But there are signs of distress. Sanderson Farms, one of the nation's largest poultry producers, said it lost $56 million in its most recent three-month period, despite higher sales. The company cited "... significantly higher costs for corn and soybean meal, our primary feed ingredients, compared with the same period a year ago."

Tyson Foods remained profitable even with "extremely volatile input costs and market prices at or near historical lows." The company said its chicken segment likely will lose money in the fourth quarter.

The poultry business  is critical to Georgia, employing 100,000 people, directly or indirectly, and contributing an estimated $13 billion to the economy each year. The state has 3,800 poultry farms and is the largest poultry producer in the U.S.

The only solution to the problem, poultry industry executives suggest, is to cut supply by putting less chicken on the market. That will cause prices to rise, restoring profitability.

"Production has got to go down. They can't continue to operate at a loss, and right now their costs of production are significantly greater than what they can get for the product at the grocery store," said Mike Lacy, head of the poultry science department at the University of Georgia.

Hensley, president of Baldwin-based Fieldale Farms, expects that U.S. production of chicken, now about 160 million head processed each week, will be trimmed to less than 150 million. When that happens, he said, the wholesale price of chicken will jump from the current $1.55 per pound. Last year, the price topped $2. Overall, food prices have increased during  the same period.

If poultry prices don't rise, Hensley said, "every chicken company will go broke."

Even if that does happen, it will take time to affect the retail market. One reason is that consumer demand for chicken drops off in cool weather months, so the lower supply won't quickly prompt prices to rise.

Brenda Reid, a spokeswoman for Publix Super Markets, said, "We anticipate that our cost of chicken will go up slightly. However, our retail price for customers will remain the same through the end of the year. We will not be able to forecast our pricing into 2012 until we get closer to the end of this year."

Lacy said he is reluctant to label the current problem facing the poultry industry a crisis, but he is concerned.

"These things do go in cycles," he said. "But this one has been extremely difficult because of the perfect storm of the downturn in the economy, the unprecedented feed costs, the rising fuel prices and problems with some of the export markets (for poultry)."

Poultry industry representatives said corn prices are up because of demand for use in ethanol. Drought conditions in growing regions also cuts crop production and boosts prices.

Several other factors contribute to poultry producers' pain. Higher diesel fuel prices boost costs producers who may use thousands of gallons a day.

Also, demand for chicken, while still strong in general, is uncertain in some export markets such as China and Russia, although it has picked up in other markets  including Mexico and the Middle East.

Still, the cost of corn, by far the main feed stock for poultry, remains the biggest problem.

"There's no good substitute for corn," Hensley noted.

GEORGIA POULTRY FACTS

Source: Georgia Poultry Federation