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Authors: Isis Almeida, Michael Hirtzer, and Kim Chipman

Feeding the world’s chickens, pigs and cattle has become so expensive that it has disrupted global trade flows.

As grain prices soared, American chicken giant Perdue Farms Inc. took a rare move to purchase American staple soybeans from rival Brazil. Brazil's largest poultry producer BRF SA has turned to neighboring Argentina to purchase corn, while feed producers in China and the United States are buying wheat, which is more commonly used in bread.

These and other strategies of the world's top food companies have highlighted the degree of tension in the global market. An indicator of grain prices is at an eight-year high, which has pushed up the cost of animal feeding and indicates that consumers may face higher meat prices. Nonetheless, as the world recovers from the pandemic and keeps up with growing meat demand, industry executives say that the rise is far from over.

"The profit margins in the meat and chicken industries are still high, so price increases have not yet curbed their appetite," said Brian Williams, senior vice president of Macquarie Group, Inc. in New York. "However, the price of corn has risen enough for wheat to be allocated in certain areas of the United States."

All this seems simple, but changing the animal’s diet brings some risks: wheat should not be fed to young cows, and if they eat too much, the cows will become bloated. Researchers at North Dakota State University recommend that when wheat is introduced, the proportion of wheat in the animal's diet should not exceed 15%. The color of a bird’s skin may also vary depending on the food it eats. Corn-fed chickens look yellow, which is a feature avoided in some countries.

"You can't really change the cow's diet, or the diet of any animal, really very suddenly," said Tyler Beaver, founder of the Beaf Cattle Co. brokerage firm in Arkansas. "When you make big changes to anything, their growth will stagnate."

Due to reduced supplies from the United States, Perdue will import 31,450 metric tons of Brazilian soybeans, and the Turandot IV will set sail from the northern port of Barcarena next month. Concerns about the reduction of Brazilian safrinha corn production have caused prices in South American countries to soar, providing BRF with the opportunity to purchase two shipments from Argentina.

Rabobank Senior Grain and Oilseed Analyst Stephen Nicholson said: “When prices rise and supply is tight, you tend to experience abnormal fluctuations.” “Importing soybeans into the United States is a psychological blow to the market and sometimes depresses it. price."

Juan Luciano, CEO of Archer-Daniels-Midland, one of the world’s largest agricultural products traders, said that with the increase in corn prices, China is buying wheat from several countries, and Brazil is also buying some. wheat. He said on the earnings call this week that US corn arriving in China will soon be more expensive than wheat.

Paulo Sousa, the CEO of Cargill in Brazil, said that high prices are beginning to weaken the profits of Brazilian poultry and pig producers, but that prices are not enough to curb demand. Since Brazil is already a wheat importer, any feed conversion in South American countries will be restricted.

"Corn and soybean meal are the main components of animal feed, so there are not many options," he said.

Joe Nussmeier, agent of Frontier Futures in Minneapolis, said that in the United States, some feed manufacturers in the Southern Plains bought wheat in March and April, when the price was close to the price of corn.

Feed manufacturers and meat packers will soon get some relief. Although the estimated acreage in the US earlier this year disappointed the market, prices have soared since the survey was conducted. This may stimulate more planting

If farmers are unwilling to provide all planting intentions in order to prevent prices from falling, the supply may exceed expectations. In addition, the agricultural technology start-up Farmers Business Network said in March that due to price increases, growers have renewed agreements with the agency to reserve land for environmental purposes and are now resuming production in these areas.

Fabio Sandri, chief executive of Pilgrim's Pride Corp, the second-largest chicken producer in the United States, said that as farmers respond to rising prices, “we see the possibility of new land being discovered.” Even with the demand for chicken meat, higher feed prices have compressed the company's profit margins are rising.

At present, the world is still facing the problem of shortage of feed grain, and the supply of wheat is expected to be more abundant. If the price of corn continues to rise, it will not take too much wheat to allow more wheat to enter the animal’s diet. Corn futures this month climbed to $6.84 per bushel, the highest level since 2013.

"Like we saw in 2012, summer weather panic rebounds or problems may cause more wheat to enter feed conversion," Williams said. "This can be achieved by keeping the price of corn always above $7.00."

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