Effects of grain and oilseed prices on the costs of US poultry production

Abstract

In 2002, the US government encouraged the production of ethanol and other biofuels through a combination of tax benefits and direct subsidies. Most of the ethanol produced in the United States comes from corn, the most abundant crop available. In 2002, 11% of available US corn was used for ethanol production. By 2008, approximately 30% of the US corn crop was used for ethanol production. The increased demand for corn supplies as a result of the diversion of significant amounts of corn for biofuel production in the United States, combined with increased world demands for feed grains, have resulted in unprecedented feed prices for livestock and poultry. Feed ingredient costs as a percentage of live production costs have increased from 51.8% in 2001 to 68.7% in 2008. Live production costs for broilers increased from $0.25 per pound of live weight in September 2006 to $0.45 in 2008. Similarly, live production costs for turkey meat increased from $0.35 per pound in 2006 to $0.58 in 2008, whereas the live production costs for a dozen eggs increased from $0.34 to $0.56. The increased costs of feed ingredients in the United States have resulted in $9.36 billion in cumulative additional costs to the poultry industries since 2006. Despite increases in land planted to corn and soybeans, the demand for feed grains has outpaced the supply. These factors will likely continue to put pressure on poultry producers in the United States as they seek to regain profitability.