Why Meat Prices are Rising or the Real Cost of Energy

Why Meat Prices are Rising or the Real Cost of Energy

Many of you have asked about the costs associated with meat production, specifically the increase in our grain. As you know, we purchase all of our grain from the family owned Poulin grain company out of Vermont. They make specialized pellets for our pigs, poultry and sheep – while the components vary from species to species, they all include corn as a main part of the grain. Hence the change in the demand for corn has a significant impact on our costs as well. I thought I would provide a bit more information based on what we are learning.

Our corn prices are skyrocketing due to the demand for oil and gas in the US and in China. As we all know prices at the pump continue to rise and there seems to be no satiating the world’s energy demand. Gas and oil are finite resources. Recent advances in technology have allowed ethanol (an gas-like liquid derived from corn) to be mixed with petroleum based gas to power engines. Some engines can be driven on 100% ethanol. Currenly, most gas sold in the US contains 10% ethanol. The demand for gas is strongly affecting the demand for corn which in turn impacts livestock production in the US.

A recent UDSA repot indicates that the ethanol industry’s strong demand for corn is having a big impact on the cost of livestock and will hike the price for beef, pork and chicken. According to the USDA, ethanol production is consuming a full 20 percent of last year’s corn crop and is expected to use 25 percent of this year’s harvest driving up the price of corn. The average price of corn as I write this is $3.20 per bushel, up from $2 last year – a 62.5 percent increase!

These higher prices will reduce meat and poultry production and increase prices according to a slew of experts. As a local farmer, I am just concerned about careful monitoring of our production costs. The National Chicken Council reported that the price of corn resulted in a 40 percent increase in the cost of feeding chickens in the last three months alone.

In classic Washington- speak, the Deputy Agriculture Secretary states that the USDA is closely monitoring corn supply and demand and the result will likely force farmers to plant more of the crop. “We do have confidence in the marketplace’s ablity to react” Conner stated. “We believe that producer are seeing the market and saying ‘I need more corn, not only for ethanol, but for our feed needs in this country’.

While Conner states his faith in the farmers, the USDA continues to pay farmers NOT to grow corn. The CRP program pays landowners to take land out of production that is highly erodible or otherwise environmentally sensitive and this land is often used for hunting preserves. It is unclear whether Dick Cheney was on land formerly known as a corn field when he shot his friend last year.

While Washington is trying to figure out who is on first - here is what we know according to the Miner institute:

1. Ethanol Plants are proliferating. In December 2006 there were 110 ethanol plants with 73 more under construction and 200 additional plants in the planning stages.
2. Corn based ethonla production is expected to grow by at least 1 billion gallons each year to reach 8 to 10 BILLION gallons by 2008 -09 and 31.5 Billion gallons by 2015 comprising a full 20 percent of the US fuels consumption.
3. There will be less corn for livestock. Depending on assumptions, experts predict between 20 and 50 percent of the US corn crop will be used for ethanol production by 2008 (next year). The Center for Agriculture and Rural Development (The CARD group) predicts the cost of production for hogs to increase 31 percent.
4. Corn prices will increase. On April 4, 2007 corn futures on the Chicago Board of Trade shot up to $4.39 a bushel for May.

The demand for energy is hitting everyone. Iowan, the number 1 state for corn, hogs, eggs and now ethanol is projected to become a net importer of corn to feed both the livestock and ethanol plants. Nebraska will need to import corn if only ½ of the proposed ethanol plants come on line. Land value in the Midwest is being fueled by the ethanol industry with an average increase of 12.7 percent from 2005 to 2006 and no end in sight.

The demand for energy continues to drive all other aspects of the economy. The ethanol boom is not going away any time soon – some countries in Central and South America get up to 50% of their energy from ethanol. As farmers, we will likely see many impacts on how we do business. We have already seen a dramatic increase in crop process and will likely see shifting use in crops, different crop systems evolve and lots of opportunities for those who understand the the issues and economics driving the bio-fuel industry.

The upshot for small family farms is a continued diversification and focus on the bottom line. We compete with feedlot operations, grass-fed beef from Central and South America and hogs raised in barns where people need to don protective gear to simply enter. The economies of scale drive the lower costs of commercially raised meat. Our family-farm raised animals have happy, healthy lives. They are fed high quality grass and grain, live as nature intended and taste great!

Busy April Weekend

Hello All,
Our weekend was very busy - with the weather this week many of our piglets had turned their pastures into mud pits extrodinaire - we decided to move everyone into the barn to keep them dry and healthy during the week of the monsoon. There is nothing worse for animals than being wet and cold -it is a sure mixture for coughing and worse - we are in the process of relocating everyone to summer pastures, but right now they are all in the barn - the stable is full!! We will be moving them to spring and summer pastures over the next couple of weeks, so it is a short time to make sure all stay dry and healthy.

If you visit our website, you may notice we have changed our prices. This does NOT affect current members. We will be honoring all prices throughout the life of your membership - it is our agreement with you. However, corn prices have skyrocketed over $100 a ton in the last month and show no signs of abating. We use grain for our laying hens, meat birds and pork, so this has had a significant impact on our business. We are competeing with ethanol producers and midwest farmers who have been paid for years to NOT grow corn unde federal farm policy. Now that the demand is rising rapidly, the supplies are not there. There have been a number of articles in various publications in the last month about the concern for world food supply, particularly third world nations with the competition for corn.

As we continue and learn the farming business, we are becoming acutely aware of the dynamics and economics of livestock farming in New England. We will always continue to price our product as reasonably as possible. We hope that by continuing to share what we learn as we go, you will have a better understanding of farming in New England.

Thank you to all of you who have signed petitions, called your represenatives and offered support for the diary farms. The diary hearings have been held regarding support for the remaining 169 dairy farmers in MA - two of whom are my neighbors and five are in Hardwick. MA farmers are competing in a global economy - much of the milk that is distributed in MA now comes from NY and the midwest with some coming from as far away as California. Shipping milk from areas in the US where land is cheap and plentiful is cheaper than raising cattle in the northeast. There are very few 1000 acre farms and larger left in New England and that is the economies of scale that many of the midwestern farms work with. Farm policy in general are made at the national level and it is a difficult thing for states to become involved in - As farmers, we certainly hope that the governement will look at the full public good offered by our dairy farmers and consider the open space and protection of the land as part of what they offer. To date there is no resolution. If you have note yet voiced your support for our dairy farmers, please send a quick word to our governor to show support, as he has been somewhat neutral.

Our spring births continue. Last Sunday Bam-bam gave birth to her second calf Panda. Panda is a little girl (hiefer) with a face that looks just like a Panda. She is our fifth generation from Maggie, our original cow. Maggie gave birth to Allie who had Bandit who then gave birth to Bam-Bam who gave birth to Panda. I feel like I know my cows family tree better than my own! Please check our website out for pictures of Panda : ) She isincredibly friendly and a great girl : )

Sam's egg birds are in full force. He has plenty of eggs for sale and I will have them with me tonght. They are local, healthy and organic. Sam and his sister Caroline worked to paint his own sign last weekend. While the tie-dye color scheme was more indicative of the leanings of the sixteen year old, we appreciated the sign and did not explain about branding or farm colors - that will come later : )

Our pigs are continuing to grow - also fifth generation of only Poulin grain fed pigs. We have a barn full of 30 piglets right now plus moms and all of our growers - it is Hog Heavan down there - I am not sure our sheep agree!!

We will be having a farm OPEN HOUSE on Sunday April 29 - we are hoping to be a bit past mud season at that point and welcome you at any time from 12 to 4 to come over, enjoy hiking through our fields, pet a baby animal or collect your own eggs. We welcome visitors any time we are here - but you may end up talking to us as we put up fencing or finding we are not home which is a disappointment for all - so please join us on our open house or call to set up an appointment. One of our favorite parts of the farm is geting to know our CSA members : )!

Take care, thank you again for your support of Chestnut Farms and for your support of locally
grown, locally harvested food. It really makes a difference.

Kim Denney
Chestnut Farms
404 Turkey St. PO 545
Hardwick, MA 01037
413-477-6656
http://www.Chestnutfarms.org