Lower Costs But Tougher Market for Meat Producers

I think to figure out how to go after animal agribusiness, it’s vital to understand the business realities they operate under. This wonkish Forbes piece does a great job of explaining the dilemma meat producers face. Corn prices are down, which is great for them, since it means they can raise more animals for less money.

But while lower corn costs are giving meat producers the incentive to boost production, it’s happening at a time when meat consumption is dropping significantly. Put these two trends together and you’ve got a real mess for agribusiness. One analyst puts it bluntly:

We would prefer higher corn prices to ensure that the severe hog production losses would create bankruptcies in the hog industry and a meaningful hog liquidation that would produce years of strong profitability.

I wonder what’s declining at a quicker rate, meat producers or meat consumers? The next few years are shaping up to be ugly ones for the industry. (Via Doucette.) Link.