Posted on 05/04/2011 6:47:32 PM PDT by blam
Smithfield CEO: Higher Food Prices Are Here To Stay
Phoenix Capital Research
April 4, 2011
Here’s a zinger of a news story that most commentators haven’t bothered to take note of…
The CEO of Smithfield Farms, the largest pork producer in the US. Among other things he said:
“Maybe to someone in the upper incomes it doesn’t matter what the price of a pound of bacon is, or what the price of a ham, or the price of a pound of pork chops is,” he says. “But for many of the customers we sell to, it really does matter.” Workers can share cars when the price of oil rises, he quips, but “you can’t share your food.”
Mr. Pope also worries about the impact on farmers, who are leveraging up operations to afford the ever-rising price of land and fertilizer that has resulted from the increased corn demand. “There are record prices for livestock but farmers are exiting the business!” he exclaims. “Why? Farmers know they won’t make money.”
Weather is a factor, too. “We’ve had the luxury for the last three years of extremely good corn crops, with high yields and good growing conditions. We are just one bad weather event away from potentially $10 corn, which once again is another 50% increase in the input cost to our live production.”
…Not all companies will survive this economic whirlwind. Mr. Pope recalls what happened the last time there was a surge in corn prices, in 2008: “The largest chicken processor in the United States, Pilgrim’s Pride, filed for bankruptcy.” They “couldn’t raise prices, so their cost of production went up dramatically.” Could it happen again? “It darn well could!” Mr. Pope exclaims.
…Mr. Pope says the “losers” here “are the consumer, who’s going to have to pay more for the product, and the livestock farmer who’s going to have to buy high-priced grain that he can’t afford because he’s stretching his own lines of credit. The hog farmer . . . is in jeopardy of simply going out of business ’cause he doesn’t have the cash liquidity to even pay for the corn to pay for the input to raise the hog. It’s a dynamic that we can’t sustain.”
So here’s a CEO, someone with actual business experience (not some moron academic who’s never run a business a day in his life) telling us the following:
* Food prices are up a lot and going higher in the future.
* Despite high food prices, farmers are quitting farming (lower supplies are coming).
* Food companies will be going bankrupt (even lower supplies are coming).
In other words, we are rapidly heading into a food crisis. Food prices are NOT going to be coming down. And we’re going to be seeing food shortages in the US in the coming months.
Smart folks are already preparing their families and portfolios for what’s to come.
Bin Laden bounce will last until the voter buys groceries and gas.
My asparagus are normally up in early to mid April. It is May 4 and only the purple tips are showing at ground level. With rain and warmer temps forecast, they will be popping soon, but nearly a month late.
As soon as the weather warms and it isn’t raining, my neighbors will be planting their row crops 24/7 to get it done. I remember bean harvests that went on all night, or so it seemed, with flood lights on the combines.
Hoping for a long enough season, this year. In a cold Spring year, an early frost will be devastating to tender garden produce.
Well, I was thinking about this and had actually gone on to another post, but I came back because, he states that Puritan Pride went bankrupt. Perhaps, but _someone_ is producing chicken under that label because I still see it in the grocery store. So bankrupt isn’t necessarily out of business.
OTOH, while the prices of all chickens have increased, the weight of the packages has declined at the same time. Whole roasters are still affordable and the same weights, but you get perhaps 20% less in cut-up chicken, especially if you buy skin-on, bone-in chicken beasts.
Pork is more expensive, too, of course, but it is still the most affordable meat if you buy the shoulder or a whole loin and portion it yourself. Bacon is way up. Even Spam has gone up, some.
It goes back to corn and corn goes back to diesel. Even with the off-road tax break, one of my farmer neighbors told us he will use over 850 gallons in a day when planting row crops and that is a huge expense.
I wonder if we will be forced back into the days when every family raised a pig on scraps? Except for the brand-new litters, which are adorable, raising pigs is a muddy, smelly business.
I have four dogs (click on my name to see them) that I feed one chicken leg quarter every day. When I started doing this (about 9 years ago), I could get a 10 pound bag for $1.90 each. Tomorrow, I will buy them on sale for $6.50 each 10# bag. (still not a bad price for meat)
In the store tonight to pick up some cereal. My favorite, Great Grains - $6.09 a box. I usually pass it up if it’s over $4. Looks like I’m switching to generic.
I’m hoping to get some grocery shopping in today; been working lots of overtime lately and the cupboard is bare! I also have to tank up at over $4 a gallon, so this is going to be one expensive day off! Grrrr!
Soybeans are a part of almost every animal feed.Meat prices will soar if soybeans are in short supply.
True enough ~ and soy beans get into plastic stuff as well, but when you get right down to it an asian origin pea pod is no substitute for fava beans is it.
The Shills are Coming!! The Shills are Coming!!!
Oh wait. I’m too late.
“Meanwhile, Congress does nothing about the aspect of this that they could address — agriculture subsidies in general, and ethanol subsidies in particular.”
I don’t know what you’re complaining about. I think burning our food is a splendid idea.
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