NEWS: Higher priced grains = increased animal slaughter - Slate08/11/06

[Guest guest]

Sorry, I cannot follow your logic. It says in this article that the increase

in the price of grains is affecting the meat industry negatively because it

is increasing the input costs for meat producers. Increased costs -->

increased prices for meat --> decreased consumption.

 

Your servant,

Krsnendu dasa

 

On Tue, 15 Aug 2006 13:41 -0400, Noma Petroff <npetroff (AT) bowdoin (DOT) edu> wrote:

>

> This article from Slate confirms what we've always known. Increased

> grain prices = increased animal slaughter.

>

> Often, increased grain prices are the direct result of rising petroleum

> prices. This story adds a twist: Increased petroleum prices make

> corn-based ethanol fuels a more attractive substitute. So now, the

> ethonol market is competing with the livestock market, working together

> to push up the price of grain.

>

> Put another way, increased ethanol use = increased cow slaughter. All

> this of course points to Srila Prabhupada's instructions: Ultimately,

> to guarantee cow protection, we need self-sufficient villages that are

> not dependent on petroleum or other industrial fuels.

>

> your servant,

>

> Hare Krsna dasi

>

> ***********************************

> ***

>

> Slate

>

> moneybox*

> The Protein Glut and the Carb Boom

> Cars, not people, are the corn hogs.

> By Daniel Gross

> Posted Friday, Aug. 11, 2006, at 7:21 AM ET

>

> Each year, Americans spend more on healthy food, diet books, and

> exercise equipment. And each year, Americans get heavier, which makes

> obesity treatment a growth industry. The logical investment thesis:

> Invest in an organic-foods company /and /in a chain of surgical centers

> specializing in liposuction.

>

> When the Atkins diet was all the rage in the early part of this decade

> and millions of Americans shifted away from carbohydrates and toward

> proteins, there was another obvious paired trade: Buy the stock of

> protein-pushers like steakhouses and meat processors and sell the stock

> of carbohydrates machines like bakeries and pasta makers. After all, in

> 2004, carb-dependent companies rushed to use the Atkins excuse

> <http://www.slate.com/id/2100324/> to explain poor results. By early

> 2005, the shift to protein was creating a chicken boom

> <http://www.slate.com/id/2112698/>.

>

> But in the last year, the balance of power between carbs and proteins

> has shifted, in part because of diets and in part because of global

> economic trends. As a result, there seems to be a glut of protein and a

> huge demand for corn and grain.

>

> The July 31 earnings

> <

>

http://ir.tyson.com/phoenix.zhtml?c=65476&p=irol-newsArticle&ID=889533&highlig

> ht=>

> release from Tyson <http://www.tyson.com/Corporate/>, the nation's

> biggest meat processor, tersely noted that "[o]versupply of proteins

> negatively impacted sales prices and operating results." Across the

> board, prices for its products were down sharply: 13.9 percent for

> chicken, 8 percent for beef, and 5.2 percent for pork. And thanks to

> higher energy and operating costs, the company lost money on its

> operations. The next day, No. 2 chicken processor Pilgrim's Pride

> likewise reported

> <

>

http://phx.corporate-ir.net/phoenix.zhtml?c=68228&p=irol-newsArticle&ID=890190

> &highlight=>

> a loss. The culprit: too many chicken parts chasing too few mouths. O.B.

> Goolsby Jr., the company's chief executive officer, cited the

> "challenging protein environment seen in the first half of the fiscal

> year." In a set of illuminating charts

> <http://media.corporate-ir.net/media_files/irol/68/68228/slideshowqtr3.pdf

> >,

> Pilgrim's Pride noted that consumption of all red meat and poultry fell

> 0.2 percent in 2005 and is projected to rise just 0.7 percent this year.

> Earlier this week, Gold Kist <http://www.goldkist.com/>, a big chicken

> producer, similarly blamed its quarterly loss

> <

>

http://ir.goldkist.com/phoenix.zhtml?c=180450&p=irol-newsArticle&ID=893266&hig

> hlight=>

> on "an oversupply of broilers and competing meats and low export sales

> prices." Here's the sad-looking one-year chart

> <http://finance./q/bc?s=TSN&t=1y&l=on&z=m&q=l&c=gkis,ppc,%5eGSPC>

> of Gold Kist, Tyson, and Pilgrim's Pride against the S&P 500. Meanwhile,

> the stock of steakhouse chain Morton's

> <http://www.mortons.com/website/index.html>, a barometer for Americans'

> relative preference for beef, has performed poorly

> <http://finance./q/bc?s=MRT&t=6m> since its initial public

> offering earlier this year.

>

> Overcapacity and fears of avian flu and mad-cow disease aren't the only

> factors hurting the profits of protein-based companies. They're being

> forced to swallow higher costs for energy and for their main input: the

> carbohydrates they use to fatten up chickens, pigs, and cattle. For in

> the last year, as the price of protein has plummeted, carbs have been

> enjoying a bull run. Check out these charts that track futures prices on

> corn

> <http://cbotdataexchange.if5.com/DataEOD_F_Chart.aspx?symbol=C/F.CBOT>,

> wheat

> <http://cbotdataexchange.if5.com/DataEOD_F_Chart.aspx?symbol=W/F.CBOT>,

> and soybeans

> <http://cbotdataexchange.if5.com/DataEOD_F_Chart.aspx?symbol=S/F.CBOT>

> at the Chicago Board of Trade during the last year. The trends for corn

> and wheat have been up significantly, while soybeans have fallen

> somewhat. That translates into thinner margins for protein companies.

> Gold Kist noted that for the nine months ended July 1, 2006, the average

> price of corn was 4.5 percent higher than in the previous year.

> Pilgrim's Pride noted that through the third quarter of the current

> fiscal year, the price it paid for corn was up 5.2 percent. And,

> according to this presentation

> <http://media.corporate-ir.net/media_files/irol/68/68228/slideshowqtr3.pdf

> >

> (see Page 9 of the PDF), the U.S. Department of Agriculture and traders

> at the Chicago Board of Trade expect the price of corn to rise sharply

> in the coming year.

>

> High crop prices are good news for the farmers who grow carbohydrates

> and for the companies that process them. ADM <http://www.admworld.com/>,

> one of the world's biggest processors

> <http://www.admworld.com/naen/about/overview.asp> of grains and

> oilseeds, just reported record annual results

> <http://www.admworld.com/naen/ir/news.asp>,* *with sales, margins, and

> profits all on the rise. Here's a one-year chart

> <http://finance./q/bc?t=1y&s=ADM&l=on&z=m&q=l&c=&c=%5eGSPC> of

> ADM against the S&P 500.

>

> But here's where the diet thesis breaks down: The prices of corn and

> grains aren't rising because people are consuming more to fuel their

> bodies. They're rising because people are consuming more carbohydrates

> to fuel their cars. Amid the investment boom

> <http://www.slate.com/id/2146239/> surrounding alternative energy, a

> great deal of capital is flowing into ethanol, and corn is the main

> ingredient in ethanol. In its annual outlook

> <http://www.ethanolrfa.org/objects/pdf/outlook/outlook_2006.pdf>, the

> Renewable Fuels Association <http://www.ethanolrfa.org/> noted that in

> 2005, ethanol production rose 17 percent to 4 billion gallons, more than

> double the 2001 total. In 2005, according to the National Corn Growers

> Association <http://www.ncga.com/>, 14.6 percent of corn production

> <http://www.ncga.com/WorldOfCorn/main/production1.asp>, or 1.575 billion

> bushels, went to produce ethanol. At the end of 2005, there were 29

> refineries under construction with a combined annual capacity of 1.5

> billion gallons. The ethanol boom has increased both demand--and

> hypothetical future demand--for corn and other biomass. Today, ethanol

> plants increasingly compete with protein-raisers to buy corn. To be

> sure, environmental factors such as weather and pestilence affect the

> price of corn, but the capital and excitement surrounding the ethanol

> market is also helping to push up the price of corn.

>

> On Wall Street, protein is down and carbs are up. But it has less to do

> with what we're stuffing into our mouths than what we're funneling into

> our SUVs.

>

> /Daniel Gross (/www.danielgross.net/ <http://www.danielgross.net/>//)

> writes *Slate*'s "Moneybox" column. You can e-mail him at

> //moneybox (AT) slate (DOT) com/ <moneybox (AT) slate (DOT) com>/./

>

> Article URL: http://www.slate.com/id/2147490/

>

>

[Guest guest]

Well, I understand the confusion. The key problem is that increased

costs for the farmers can't necessarily be translated into increased

prices for consumers.

 

In fact the article points out that ranchers are

 

being

 

forced to swallow higher costs for energy and for their main input: the

carbohydrates they use to fatten up chickens, pigs, and cattle. For in

the last year, as the price of protein has plummeted, carbs have been

enjoying a bull run.

 

 

EXAMPLE:

 

Farmer Brown had 200 beef cattle. Feed used to cost $1000 per animal

every year = $100,000 per year in feed costs to feed 100 of the

animals. At the end of the year, he could sell the 100 animals for

$150,000, resulting in a net gain of $50,000 per year. (He keeps the

other 100 animals for the next year.)

 

But rising feed costs have cut into his profits. Now it costs $1500 per

animal to feed the animals = $150,000 per year in feed costs to feed 100

animals. But he's caught in a squeeze because he can't pass that

increase along to consumers. They don't want to pay more for beef. So

he still gets only $150,000 for the 100 animals. Thus, he's working all

year for no profit.

 

At this point, he has to decide what to do: Sell off the rest of his

animals also -- or hope that feed prices will drop next year? Many

farmers will sell more cattle than usual -- but that means an

over-supply in the market.

 

According to the law of supply and demand, the price he gets per animal

will drop even further -- thus he decides to slaughter more animals so

he can make enough to keep up the payments on his farm mortgage,

agricultural equipment, etc.

 

When grain prices are higher, farmers can't pass their increased prices

along to consumers. Since their profit margin is squeezed, they are

making less money for the same amount of work. They need more money to

make ends meet. Since they are not devotees, their solution is simply

to slaughter more cows.

 

ys

 

hkdd

[Guest guest]

> Sorry, I cannot follow your logic. It says in this article that the

increase

> in the price of grains is affecting the meat industry negatively because

it

> is increasing the input costs for meat producers. Increased costs -->

> increased prices for meat --> decreased consumption.

>

 

Decreased consumption = lower demand for animals for breeding

 

Lower demand + higher cost of feeding them = reduction of breeding stock =

more slaughter short term.

[Guest guest]

On Tue, 15 Aug 2006 18:49 -0400, Mark Middle Mountain <gourdmad (AT) ovnet (DOT) com>

wrote:

>

>

> > Sorry, I cannot follow your logic. It says in this article that the

> increase

> > in the price of grains is affecting the meat industry negatively because

> it

> > is increasing the input costs for meat producers. Increased costs -->

> > increased prices for meat --> decreased consumption.

> >

>

> Decreased consumption = lower demand for animals for breeding

>

> Lower demand + higher cost of feeding them = reduction of breeding stock =

> more slaughter short term.

>

> = less slaughter long term???

[Guest guest]

> > Lower demand + higher cost of feeding them = reduction of breeding stock

=

> > more slaughter short term.

> >

> > = less slaughter long term???

 

Yes, less consumption means less are bred to met the lesser demand.

Consumption is cyclical though - the only sure way to keep slaughter down is

to promote vegetarianism.