Agmates Editor Steve Truman writes:
In what is described as a once in a century boom in world wide Agriculture there are winners and losers. In Australia the winners are grain, oilseed and dairy producers, the losers are Beef, Pork and Chicken Producers.
PRICES for agricultural commodities, particularly grains, are experiencing a one-in-100-year Boom. Click Here for The Australian Article
In Australian dollars the price for wheat has risen 85 per cent in 12 months, Canola 72 per cent, Dairy 29 per cent. Export beef has only risen 3 per cent in the same time.
But Beef, Pork and Chicken producers not only in Australia but across the world world are missing out because of world grain prices.
The main driver behind all of this is oil prices. U.S. biofuels policy has driven higher prices of corn, other grains and soybeans and it is costing the poultry, pig & cattle industries world wide billions of dollars per year.
A USA study, commissioned by the National Chicken Council, the National Turkey Federation and the American Meat Institute found in the US:
For US feeder cattle, it put the additional feeding cost at almost $3 billion in 2008/2009, compared to a $2.2 billion feed cost rise in 2007/2008.
This weeks Roma QLD Store Cattle index stands at 104.7 points. This shows that Australian store cattle prices are just 4.7% higher than they were in December 2006.
The US pig industry will incur additional costs of about $3.6 billion after a nearly $3 billion cost rise in 2007/2008.
A recent Australian Productivity Commission Inquiry concluded the diabolically depressed state of the Australian Pork industry was due primarily to high feed grain costs.
The US poultry industry (including broilers, turkeys and layers) about $8 billion in additional feed costs, on top of a nearly $6 billion rise in the 2007/2008 year.
The other major contributing factor to the current price rises in agricultural commodities is driven by poor peasants moving to the city in China & India. Currently in China alone 30 million people a year move from poor rural areas to the cities. Studies have show that once there, they consume 30% more protein than when in poor rural areas.
Dairy farmers around the world have been offered record milk prices but are experiencing some softening demand as consumers have been asked to pay vastly inflated prices for dairy products at retail.
New Zealand is the worlds largest dairy exporter, but the worst drought in 100 years that has hit the North Island is slashing exports.
Australia, the third-largest exporter, has been affected by drought in the Murray basin, but dairy farmers in rain-fed areas particularly in Victoria and Tasmania (cows milked off grass) have extremely good prospects for a very profitable year in 2007-08.
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Some thoughts re high grain prices to ponder:
- where would oil prices be if it wasn’t for USA, Europe and Brazil taking billions of litres of demand for crude oil out of the equation by substituting biofuels
- would not most people in the developed world prefer to pay a bit more for grain products as opposed to making the crown princes and sheikh’s even richer
- the US dollar is very weak which in itself tends to push up prices of all commodities
- many years of low prices has contributed to the current situation -$1.80 to $2.30 a bushell for corn are ridiculous prices. Also the world has been scraping by on low grain stocks ( esp wheat for several years )
- in a world starved of energy it might make more sense to harvest energy from the sun via crop and plant photosynthesis and turn that into biofuels and also meat via grazing ; and rely less on digging up oil reserves and/or intensive or factory type animal production where huge quantities of grain are needed