Soaring Feed Prices Slap Farmers

(CBS)  Steve Foglesong raises 4,000 head of cattle at the Black Gold Ranch in Illinois.

David Hale helps mind the chickens on his family's farm in Texas.

What do they have in common? Skyrocketing prices for feed, CBS News correspondent Hari Sreenivasan reports.

"This used to be 50 bucks for the full barrel," Hale said, pointing to a barrel of chicken feed.

And now?

"Seventy-five dollars - a fifty-percent increase," he said.

"All these cattle will eat 40 lbs. of feed a day and it went from two cents to nine cents a pound for that feed, that's a big big difference," Foglesong said.

Corn prices are at the highest levels they've ever been; and meat farmers are hit especially hard.

It takes 2.6 lbs of corn to make one pound of beef or chicken. It takes 3.6 lbs. of corn to make a single pound of pork.

"Chicken feed is supposed to be an idiom for 'cheap,' right?" Hale said.

But not any more. The mountains of corn it takes to feed Hale's chickens and Foglesong's cows are getting more expensive, because of increased domestic demand from ethanol plants, higher overseas demand thanks to a weak dollar, increased transportation costs - and let's not forget tight supplies.

The recent floods in the Midwest wiped out an estimated two million acres of corn and soybean crops.

"The only thing a guy's got the opportunity to do is cut back on the number of cows he's carryin', because he doesn't have any feed for 'em," Foglesong said. "So those cows go to market."

And that means sticker shock at the grocery stores, as farmers fold under pressure of high feed prices.

"That reduction in supply, yes, would result in an increase in demand and that in effect would raise prices at the grocery store level," said Agricultural Economist Mark Welch.

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Read more at Couric & Co. blog: Pecking Away Farms' Profits

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That means by next year, the price of a pound of chicken breast would climb to $2.63; beef round roast to $4.22, both up 10 percent. And the price of a pound of pork chop could be up to $4.78 - a 30 percent increase.

Farmers say they have to pass the costs on to consumers in order to survive.

"You get to the point where there's just no where else to go, you've burned what you've got and the only option is to cease doing business," Foglesong said.

"Farming makes the blackjack table look like solid, consistent income!" Hale said.

As they try to make ends meet, farmers all over the country hope you won't chicken away from those higher prices.

[gordon.couger]

The reason grain went up is the world used more than it grew for 6 out of the last 7 years and used up the suplus that were holding prices down.

The biggest increse in grain use isn''t alcohol it rasing hogs in Asia where meat comsution is going up at 7% to 11% a year for the last 7 or 8 years. India and China alone account for 40% of the worlds population. One more meal with meat a week for every one of them means a lot of grain being used.

The USDA Forign Ag Service estimates China''s grain reseves have been sriking for 7 or 8 years using more than they grow. India has done better only by buying more wheat and rice and putting it in the bin for the last three years. India''s choice to buy wheat this year in small lots instead of one large order to try to keep down the price back fired and triggered the run the pice of wheat up to $13 dollars a bushel for a day or two.

It''s a myth that you can raise feed for lifestock a lot cheeper than buying it. The fellow that farms my place has dealt in hay most of his life. A couple of years ago he made more money on hay he was buying in Norther Nebraska and hired trucka to haul it to Houston Texas and break up big bales and re-bale them in too small ones for horses. It was good deal more profitable than hay he rasied at home and hauled 6 miles to a dairy.

The costs in farming have gone up faster than crop prices. We are making good money at these prices but the won''t last very long. They never do.

GC

[gordon.couger]

Any feeder that didn''t lock in prices on corn and soybean meal win they started up will be put out of business by those that did.

While all you read about futures contracts is about speculators they are just one pice of the puzzle. The producer uses them to lock in good prices when they suit him before harvest. The feeder or mill uses them to insure the price of what the will be buying when the price is low if they can. The grain dealer uses them to reduce his risk when he buys grain that he can''t deliver until a later date. The speculator is the one that funish fills in the rough spots when non of the other three player want buy or sell grain. With prices this high there are more producers selling than are dealers or users buying and speculator fills in the gap. The reverse is true when the price are low and the user wants to lock in prices. The speculator is absolutely essential to having and orderly market where there is always some on that will buy or sell a contract when the other player want one.

We probably have more speculators than we need right now doing too much business with each other. When news comes out on a commodity it attracts more money than there is product to buy creating a paper storage and running up the price.

Usually when the news starts talking about commodity prices they are near the highs for that cycle.

The FED has to raise interest rate pretty soon and that will start the process that bring them down if they don''t do it on their own first.

GC

[MidwestMan]

The cost of corn in a pound of beef went from $.10 to $.30. I''m sure the price in the grocery store has gone up much more than $.20 because of the costs of transportation since no one wants a cow or processing plant in their neighborhood. Ethanol sure is a convient scape goat for the media and Grocery Manufactor''s Association. If you got rid of Corn based ethanol and used sugar cane and switch grass you might produce more ethanol but you wouldn''t have any co products left to feed to livestock. Think of the switch from corn acres to sugar cane acres and how that would drive corn prices up while leaving no co products left over to feed to livestock.

[davvictor]

JTait2,

Who signed all of those treaties that made it easier for manufacturing to LEAVE the country? -- Yup, Billary.

I don''t think a two-faced liberal like Hillary would do a lot of good for this country. But I don''t think McCain nor Obama will do any better either -- I''m in favor of a new place on the ballot called "Do-Over" which means that everyone gets thrown out from running and we start over with all new people!

[leopoldthelm]

This is a good story, and I love to see the little fledgling. It reminds me of the trips to see my grandmother, (I miss it!). The farmers can solve the corn problem by letting the chickens and cows eat grass. I see that the cows are locked down, that alone is anxiety. A healthy milk producing cow and chickens should eat grass. I am allergic to corn and corn containing products! These prices will not affect me, I have tried to eat (beef) hamburgers, stakes, but I don%u2019t like it. I became a vegetarian at age 12, while watching my father cook some type of animal that I did not recognized. Henceforth, I decided not to eat meat during that dinner. My mother said, little girl, you will just go hungry! I became a lacto-vegetarian (Vegan, I have lost count of the years).

[davvictor]

I think Bush has become a scape goat. Bills submitted and approved are lobbied through the senate and house. When energy ideas and legislature are put forth that enforce policies such as ethanol introduction to gasoline, it''s the job of those putting the bills together and approving them for law to do the proper research needed to understand the ramifications of those policy changes. Granted, the buck stops with the president, but any CEO/Leader can only have so much time for research and this isn''t supposed to be the expertise of our president is it? When our representatives of our various states tell the president their wishes -- the blame falls on THEM

Proper blame to the proper people please.

[mbcsmith]

The Bush presidency has left everyone but the rich in the toilet!


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Posted by omnibus66 at 08:15 AM : Jul 03, 2008


LOL...LOL again. Apparently you are foregoing food to pay your internet access fees. LOL...LOL again. LIBS just don''t get it!

[mbcsmith]

Obama is in bed the corn based ethanol producers. They have donated tens of miliions to his "grass roots" fundraising. Wet dream Obama nuts have been duped.

[babooph]

Not to worry -the massive tax cut the rich enjoy will allow them to pay 10times the current cost& still fuel up the hummer.

[omnibus66]

''The farmers do have the option of growing their own livestock feed. That would cut down on their costs.''

Posted by OneWorldUSA at 04:55 AM : Jul 03, 2008

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Growing your own feed takes land, equipment, and most of all, large amounts of fertilizer, which has tripled in price.

The Bush presidency has left everyone but the rich in the toilet!