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National Restaurant Association - Commodities expert: Corn woes could affect feed prices, protein supply

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Commodities expert: Corn woes could affect feed prices, protein supply

The ongoing drought in the Midwest is threatening the nation's corn crop, which will result in even higher food costs for the restaurant industry, a commodities expert said.

According to John Barone, CEO of Fairfield, N.J.-based Market Vision Inc., just 40 percent of this year's corn crop is rated good to excellent, compared with 66 percent in the same period a year ago. This should, he said, result in higher feed costs for farmers and increased food prices due to beef, poultry and dairy shortages.

"The quality of the crop certainly has declined because of the lack of rain," Barone said. "Currently the corn is in the pollination stage and is going through a silking process that determines how many rows there are and how many ears we'll get per acre. If it doesn't rain soon, we're looking at the crop being two or three weeks away from disaster. Or it could rain tomorrow, which would mitigate the whole thing. It's amazing how dependent we are on the weather in the Midwest."

Barone said the U.S. Department of Agriculture this year projected record planting that would yield approximately 166 bushels of corn per acre. The drought, however, has knocked that number down to about 150 bushels per acre, raising the price from $5 a bushel to more than $7 — not good news for the industry, he indicated.

"For the restaurant industry, the big takeaway is that $5 corn would have meant profitability, particularly for poultry producers and dairy farms," he said. "At $7 a bushel, they're going to cut back on production. Corn is the major feed input for poultry and, to a large extent, the hog industry. It also makes up a big percentage of dairy cow feed and, to some degree, cattle."

In essence, he said, "Commodities [prices], which were finally starting to look good this year, are not."

With the price of feed expected to rise and the poultry supply expected to decline, restaurant operators should not anticipate elevated wing prices to come down anytime soon, Barone said.

"We'll just have to wait and see what happens, but anybody looking for wing prices to come down, that can't happen until more birds are produced," he said. "There are only two wings to each chicken, right?"

He further asserted that the drought, which hit the southern plains hard last year, burned out pastures and dried up creek beds, especially in Texas, causing cattle farmers to trim their herds and hold on to only what they could support.

"What's going to happen now," he said, "is that the rebuilding of those herds will likely be on hold until next year. We thought we might be looking at some relief on beef prices in 2014, but now we're looking at 2015."

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