Commentary: Hot commodities

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As the summer’s drought worsens, the economic impact on livestock producers is growing ever more pessimistic.

As corn prices soar in direct response to predicted harvest shortfalls, ag economists are predicting that the feed cost necessary to bring a single broiler chicken to maturity could rise by as much as 50%. For an industry operating on the slimmest of profit margins—and one that has fueled its growth at least partly on its cost-competitiveness versus beef and pork—that’s a devastating development.

Some experts predict that the rise in corn prices will cost the average broiler complex as much as a million dollars in added operating costs—that’s $1 million a month.

The impact of higher feed costs on all of production agriculture is getting increasingly grim. But the drought’s effect on commodity prices isn’t limited to animal feed. Even fruit and vegetable growers are feeling the heat.

According to an Associated Press report, attendance at most farmer’s markets across the Midwest is estimated to be down by as much as one-half, versus last year. The decline is blamed on a combination of consumer skepticism about the quality and quantity of products for sale and the searing heat that tends to keep many people indoors in front of an air conditioner.

And that’s on top of the economic devastation that the parched farm fields and unrelenting heat has had on the growers’ productivity. It’s bad enough that thousands of farmers are suffering through poor crop performance and likely stunted harvests, but when your customers don’t even show up to purchase what product you do have for sale, that’s a double-barreled disaster.

Soft-headed solution

There is one other drought-related development that is truly an eye-opener. As news builds about rising meat and poultry prices at retail, due to higher production costs on farms and feedlots, the “solution” some commentators are dreaming up become truly bizarre.

Maybe the heat is getting to them.

For example: A widely publicized article on titled, “Drought Hedge: Fake Meat,” delivers an economics “lesson” that you don’t need to be smarter than a fifth grader to debunk.

“Growing corn and then eating the corn turns out to be a pretty efficient way of translating corn into calories,” wrote Slate’s economics correspondent Matthew Yglesias. “An alternative method—much less efficient but wildly popular nonetheless—is to feed the corn to animals and then eat the animal. So meat consumption ends up being very intensive in its dependence on basic commodity inputs like the increasingly scarce corn and soy.”

So far, he’s correct, despite the barely concealed contempt for the ignorance of producers who are “wasting” all those corn-based calories on farm animals. But from there, his thesis really runs off the rails.

“One possible consequence of this [inefficiency] is a growth opportunity for fake meat products,” he continued. “These have traditionally been targeted at a strict vegetarian population, which is a small—and seemingly not growing—slice of the population. But over the past few years more and more meat eaters have at least tried to experiment with less meat-intensive diets so there's more familiarity with the basic product. And if higher prices are going to force people to shift away from their favorite cuts over to stuff they don’t like as much, that can create more openings for a switch to fake meat.”

By “fake meat,” Yglesias is apparently not referring to analog products, such as meatless veggie patties and such products as tofurkey and fakin’ bacon. He’s pitching the promise of artificially grown protein substrates with meat-like texture, which are then seasoned and flavored to taste like beef or chicken or seafood. He even ends the article touting the Beyond Meat company, a start-up previously profiled in this space. Beyond Meat basically offers one product: Chicken-Free Strips, made from soy protein, pea protein, amaranth (a specialty grain) and something called carrot fiber, otherwise known as “orange slime”.

Despite being identified as an economics authority, Yglesias doesn’t seem to connect with the fact that if commodity prices continue to rise significantly, food products made from soybeans, grains and vegetables are also going to rise significantly—and virtually every brand-name meat analog item already on the market retails for anywhere from 50% to 100% higher per pound prices than the real meat products they attempt to imitate.

Most vegetarian entrees are already priced out of reach of the average shopper in the supermarket. They’re typically displayed in a “specialty aisle” along with ethnic and imported products that are sold to consumers who are decidedly not “value buyers.”

Here’s a better suggestion for people stressed by high meat prices: How about extending the meat and poultry you buy? It’s not all that hard, and it’s far more palatable, to prepare casseroles, stir-fry dishes or even good old meatloaf with—gasp!—“extenders” such as oatmeal to stretch out the family food dollar.

The drought will certainly affect farm prices and drive up food production costs.

The accompanying heat also seems to affect people’s brains, as well.

The opinions expressed in this commentary are solely those of Dan Murphy, a veteran food-industry journalist and commentator.

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