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Forbes: The Drought's Impact on Food Prices


Chicken will be the first meat to see an increase in price, but it won’t hit consumers until winter 2012 or early 2013. Demand for chicken typically picks up in the spring, and analysts say that that the increase will be most noticeable then for all parts of the bird. To understand the dynamics of the price increase, we need to look back, past even the start of the drought. Like the pork and beef industries, in the early spring of 2012, the chicken industry believed this summer would yield a bumper corn harvest, and so it upped production levels to utilize this large crop. “By the time June arrived, it was clear that rather than the record crop the USDA predicted, there was going to be a severe shortfall,” says William Roenigk, Senior vice President of the National Chicken Council. “But, by then it was too late to go to the futures market to lock in $5 corn. It was already at $8 a bushel, and now it’s nearly $9.” But it wasn’t just the lack of corn that posed a problem. Chicken producers are reliant on soybean meal for the protein element of feed and the drought has also damaged this year’s soybean crop.

With the ensuing high feed costs in mind, producers are having to readjust production in order to get demand and supply at a level where they are able to break even. In order to recoup increasing costs, the industry needs to quell supply and reduce output so as to drive up prices. “They are sending hens to slaughter before they’ve gone through their normal cycle of laying and hatching, and they are beginning to trim the number of chicks that are put into houses to grow to become market ready chickens,” explains Roenigk.

It takes about 6 weeks from the time a chick is born to when it is market ready, so it will be a few months for the market to readjust to the overall culling. According to the Consumer Price Index, poultry prices will increase 3% to 4% in 2013.

(Photo by Getty Images)

More from Forbes:
Where You Might Not Shop In 2012
America’s Most Overpriced Cities
The Best Cities For Bargain Shopping

The opinions expressed are solely those of the author and do not necessarily reflect the views of Comcast.

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