"China has long held the top importer position for soybeans, but China's imports of corn are making waves in global grain and commodity markets," reported Sawyer, adding that expectations for increased U.S. corn exports have climbed and the USDA now expects exports to account for 24% of the crop, versus 15% a year ago.
Not all segments of the livestock business will be impacted equally by feed inflation, says Sawyer. First quarter of 2021, hog producers are expected to face the highest level of inflation at 14%; followed by cattle feeders at 13% and chicken producers at 11%. By summer, feed cost inflation for the overall sector will be near 18% for the second quarter; and 16% in the third.
Asked if the upward price trend for feed is likely to encourage beef producers to hold back calves, Sawyer told DTN the percentage of operations in extreme or exceptional drought will make that less likely.
"As we look at the drought map, 27% of the High Plains region is in extreme or exceptional drought compared to half that amount just three months ago," noted Sawyer. "These moisture conditions, along with the outlook for high feed costs will yield a number of tough decisions for the cow-calf and stocker sectors moving into the new year."
On the positive side, Sawyer notes there are some possible upsides for 2021, depending on how COVID-19 efforts move forward.
He says as the country achieves herd immunity, he expects that will drive consumers toward more normalization in consumption patterns of food and animal proteins. In addition, he says he is hopeful that after a $2.5 billion investment by meat and poultry companies in the U.S. in direct COVID-19 expenses to ensure safe working conditions and reduced plant shutdowns, plants will be able to operate with a reduced likelihood of disruption in 2021.
"Many of the costs the U.S. animal protein companies have incurred due to COVID-19 will continue until a vaccine and herd immunity is in place," Sawyer said. "But with plants operating at a more normal level, absenteeism levels improving, and far fewer workers falling ill, the financial impact of COVID-19 looks to be far less in the coming year than what the industry has endured in 2020. We estimate that livestock and poultry processing costs are approximately 10% higher than a year ago at current COVID-19 costs levels, but this is far less than what the industry endured this past spring."
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December 22, 2020 at 01:42AM
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Not Much Good News for Feed Buyers Ahead - DTN The Progressive Farmer
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