Milling & Baking News Corporate Profiles - October 2011 - (Page 42)

Meat and Poultry Beef, chicken and pork Meat protein processors come to grips with high input costs and future supply constraints T he state of the North American meat and poultry industry may be summed concisely — $8 corn. As feed ingredient costs have continued to increase, the industry has restructured with a focus on supply discipline and streamlining operations in an effort to improve efficiencies. But as the potential for a bushel of corn to meet or exceed $8 looms, industry operators are feeling the pressure. “We all can see where the futures market and the cash market is on the corn market,” said C. Larry Pope, president and chief executive officer of Smithfield Foods, Inc., Smithfield, Va., on Sept. 8 during a conference call with financial analysts to discuss the company’s fiscal 2012 first-quarter results. “We’re all aware that $7-plus corn is around us. Eight dollar corn could be just around the corner from us.” In addition to feed costs, a multitude of other factors, ranging from extreme heat, drought, gas prices and weakened consumer demand, have challenged North American meat and poultry processors. One of the few bright spots has been exports, as a weak dollar and international demand for more meat proteins have supported sales overseas. A report published in late September by Rabobank International put the outlook facing the meat industry in stark terms, noting that “Rabobank believes that U.S. meat and poultry production could U.S. per capita disappearance beef and pork retail lb 2012 2011 2010 2009 2008 2007 2006 2005 50.0 49.4 50.8 49.5 50.1 47.7 45.8 45.9 65.6 65.8 65.2 62.8 61.2 59.6 57.7 55.5 Beef Pork Source: U.S. Department of Agriculture decline by nearly 5% year-on-year by mid-2012. Overall, Rabobank expects global protein supplies to tighten further in 2012 as production lags behind gross domestic product growth. Barring major economic disruption, Rabobank believes that this will lead to another year of record prices in most markets for most proteins around the world.” Where’s the beef? In its September “Livestock, Dairy and Poultry Outlook” report, the U.S. Department of Agriculture’s Economic Research Service noted that drought conditions in Oklahoma and Texas continued to result in Southern cows going to slaughter and Southern calves going to feedlots. The region represents 25% of the U.S. beef cow herd and 50% of the beef cows currently going to market, according to 42 \ October 2011 Milling & Baking News • Food Business News • Baking & Snack • Meat & Poultry Corporate Proﬁles

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Milling & Baking News Corporate Profiles - October 2011