There has been a significant increase in protein prices in the past 6 weeks and frankly we forecast prices to get higher before they stabilize late this summer.
Driving these price increases are three factors: corn prices, labor and inflation.
In September of 2020 corn was trading at a low of $3.50 bsh, this week on the Chicago exchange it hit $7.50 bsh for the first time since 2013. This 100% + increase has been driven by two factors. The largest factor is purchase of corn by China. China’s average corn purchase from the U.S. per year across 2017-2020 was about 60,000 metric tons per year. This year China has already purchased over 20 million metric tons of corn. This huge increase was driven by a couple factors in China. A mold/fungus has infected their corn causing record low yields. The mold/fungus has also affected corn storage, literally rotting corn in the silo. The second factor in China’s huge purchase is the recovery of their pork industry that had been devastated by a swine virus. The recovery hogs need corn, and the mold/fungus has made domestic Chinese corn scarce. The U.S. total production of corn is about 430 million metric tons. China’s purchase represents 5% of our total capacity this year versus less than 1/1000th of our total capacity in previous years.
On the labor front, COVID has left packing plants with a shortage of labor. In many production plants only 50% of the labor force has returned to work post COVID. Government rebates and incentives have created a disincentive to return to work. As unemployment and stimulus dollars run out it is unforeseen as to if the labor force will return to work. The result has been that weekly slaughter amounts of cattle have reduced in some weeks by as much as 10%.
Inflation has eaten into farmers budgets in terms of supplies and durable goods. Costs outside of feed to farmers have seen about a 4% to 7% increase so far this year.
On our side we have seen wholesale costs to us on middle meats (Strips, Ribeye’s, Short Loins and Beef Tenderloin) increase by 70% since January. Rounds and Chucks cost has increased by 30% or more. We have done our best to hold prices to the consumer, but we forecast that these increases will continue through the summer months, then ease starting at the end of August.
You can expect record prices on beef through the summer. Pork prices have increased as well but you will not see the effect as great in pork because farmers can produce almost 3 litters of hogs to every one of cattle in the same time frame. More hogs on the market keep increases in cost lower than in cattle. Chicken production has yet to be affected due to their short production cycle, but we are seeing pressure in labor intensive items such as wings where costs to us have increased about 20%.
Thanks for staying with us during these unforeseen circumstances. We promise to keep our prices to you as reasonable as possible for the quality of proteins we provide, and we will continue to do our part by keeping the community informed.