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Rising meat, grain prices put squeeze on supply chains

by 5m Editor
21 May 2007, at 5:01am

UK - It may be a lucrative time for farmers, but the continuing boom in grain and meat prices will put the squeeze on plant managers to find ways to cut costs out of their supply chains.

Grain prices in particular have surged over the past year with US wheat export prices up by 30 per cent and maize by about 67 per cent, according to the latest commodity forecast report by the European Commission.

Processors have already been dealing with higher packaging and energy costs. The additional hit from their commodity supplies serves as a triple blow to plant operations, which have been under pressure from management to become more efficient as margins decline.

The higher commodity costs have been due to extreme weather patterns, the higher demand from the biofuels industry and low stocks.

In Australia drought cut grain crops by more than half. Smaller crops were also recorded in the EU, US, Canada and Ukraine.

Global maize and wheat stocks are at historically low levels and should remain low over the projection period, according to the report. This factor has left processors scrambling to secure their supply source, no matter what the price.

However relief should be in sight, the Commission says, forecasting that farmers will respond to the higher prices by increasing production over the 2007 to 2008 growing season.

Most international organisations are expecting continued annual growth in production and consumption of 1.2 per to 1.4 per cent, driven by feed demand and increasing industrial use. The global stocks to use ratio of maize was just 12 per cent in the 2006 to 2007 growing season and is forecast to remain low, the Commission reported.

However by 2009 the biofuel industry is expected to consume about 30 per cent of the maize crop. Higher prices point to a 10-percentage point drop in feed use, to 40 per cent to 50 per cent of the crop.

Source: Foodproductiondaily.com

5m Editor