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Ethanol plants' strong demand for corn is driving up the cost of livestock and will raise prices for beef, pork and chicken, the Agriculture Department said today.
Meat production will fall as producers face higher feed costs, the department said in its monthly crop report. Ethanol fuel, which is blended with gasoline, is consuming 20% of last year's corn crop and is expected to gobble up more than 25% of this year's crop.
The price of corn, the main feed for livestock, has driven up the cost of feeding chickens by 40%, according to the National Chicken Council. The council says chicken, the most popular meat with consumers, will soon cost more at grocery stores. The industry worries the competition from ethanol could cause a shortage of corn.
The average price of corn, unchanged from last month, is $3.20 a bushel, up from $2 last year.
Though chicken producer Tyson Foods (TSN, news, msgs) posted its first profitable quarter in a year Jan. 29, executives warned that a dramatic rise in feed costs will raise chicken prices.
"Companies will be forced to pass along rising costs to their customers, meaning consumers will pay significantly more for food," Chief Executive Dick Bond said.
Deputy Agriculture Secretary Chuck Conner said the Agriculture Department is keeping an eye on corn supply and demand. Demand likely will prompt farmers to plant more acres in corn, he said.
"We do have confidence in the marketplace's ability to react," Conner said. "We believe producers are seeing the market saying, 'I need more corn, not only for ethanol but for our feed needs in this country.' "
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The Agriculture Department will issue planting predictions later this month.For soybeans, analysts said prices are averaging $6.30 a bushel, up from last month's average of $6.20. Last year's price was $5.66. Wheat prices are averaging $4.25 a bushel, unchanged from last month and up from $3.42 last year.
Also in the crop report, the department updated the citrus forecast to include the effects of a January freeze on California oranges.
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The California crop will be 39% smaller than last year, and combined with freezes that are expected to reduce the Florida crop, the nation's crop is expected to be 18% smaller than last season's.
This article was reported and written by Libby Quaid for The Associated Press.
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