Poultry and pork manufacturers are betting a good corn crop will result in increased production this year, commodities experts say.
The increased production should create additional supply, keeping prices at bay, a good thing for restaurateurs, who have struggled in recent years with rising food costs.
Following last year’s historic drought, which decimated the majority of the U.S. corn crop, food producers and manufacturers are cautiously optimistic that this year’s supply will be better than the previous one. The reduced crop caused feed prices to skyrocket, which led to higher production costs for suppliers.
“The big issue this year, bar none, is what kind of corn crop we’ll get,” said John Barone, president of Fairfield, N.J.-based Market Vision Inc. “Everything depends on whether it will rain in June or July. We had two years of not very good precipitation. That said, poultry and pork producers are gambling that we’ll pull a good crop out of the ground. They have not backed off of production in the way we thought they would.”
Though Barone said this could help temper food costs, he noted that prices on some pork and poultry products would still be expensive.
“Bacon and chicken wings likely will remain high because they’re in very high demand,” the commodities expert said. “And chicken breasts are higher than last year, but historically low. However, seafood is lower this year and coffee and sugar prices have come way down, too. It’s actually much better news than we’ve had in a while.”
Beef, on the other hand, is a different story, Barone said. Everything is dependent on whether there is enough grazing pasture, he noted. If there is, cattle farmers won’t sell their heifers for slaughter, which would result in a decrease of supply.
“If we get a good spring, look for the herds to expand in 2013, even though new animals won’t achieve slaughter weight until around 2016.”
Barone said beef prices, even if less of the protein is available, won’t break last year’s price highs as initially expected.
“Consumer push back is the reason,” he said. "If a price goes high enough, people will stop buying it. That said, prices will still be historically high, but not as high as they were last year. The bull market has run itself out.”
Still, he cautioned, everything depends on the weather.
“Another drought could change everything,” he said. “I think everyone is in a wait-and-see mode.”