It’s two sides of the same coin.
But eventually, all price hikes are paid by consumers.
Executives at Tyson Foods Inc. and Pilgrim’s Pride Corp. said rising grain costs this year would pressure their chicken businesses and could lead to increased prices for consumers. Costlier feed, typically the priciest part of raising a bird, comes as meatpackers are spending hundreds of millions of dollars on Covid-19 safety measures.
Stewart Glendinning, Tyson’s chief financial officer, said:
“The change in pricing in grains has been nothing less than enormous, and that is going to weigh on the business.”
Pilgrim’s Pride Chief Executive Fabio Sandri warned customers that higher prices are on the way.
“When we have the contract negotiations with our key customers, we will also discuss the increase in prices due to the increases in the feed.”
Diminishing supplies and surging demand are driving agricultural commodity prices higher. After U.S. farm exports to China swooned during the two countries’ trade war, they have rocketed back since last summer, driven by Chinese pork producers’ efforts to rebuild hog herds lost to African swine fever. China in 2020 bought $26.4 billion worth of U.S. agricultural products, according to U.S. Census Bureau data, nearly double 2019’s level, with corn exports hitting a record 6.9 million metric tons. U.S. soybean shipments to China rebounded to 34.6 million tons, almost matching 2016’s record level.
The export rebound, combined with persistent dryness afflicting South American crops, has been a boon for companies that buy farmers’ crops, trade them overseas and process them into food ingredients and animal feed.
Archer Daniels Midland Co. last month said it reaped more than $2 billion in profits from its grain trading and oilseed processing businesses in 2020 and projected record earnings in 2021.