The US poultry and egg industry are both major users of animal feed, and chicken and egg prices are set to soar if an increase in the cost of feed sweeps the supply chain in the months ahead.
The US is the largest poultry meat producer, a major egg producer, and a large exporter of processed egg products, with about 20% of the world's poultry meat supply. They are closely followed by China (17%) and Brazil (16%). Brazil has about 34% of global poultry meat exports, but at around 33% the US is close as the second largest exporter of poultry meat in the world. A distant third is the EU, at 11%.
The cost of poultry production is highly dependent on the cost of feed. In most modern systems, poultry feed can represent something like two-thirds of the cost of egg and poultry meat production, with other costs including, labour, heating, and land.
US broiler meat and egg production is expected to decline in 2013 in response to higher grain prices, but output from both may be subsequently encouraged even if higher meat prices are consistently seen. Demand for less expensive meats such as poultry is tending to rise, as higher prices for other meats encourage cash-strapped consumers to trade down, particularly from beef. US poultry meat exports to the EU are hampered further, however, by an EU ban on US poultry imports since 1997.
US eggs may also be increasingly off the menu for the EU, as consumer preference has tended moved the EU market toward free-range production as strict welfare legislation. Imposed at the start of 2012 in the EU, the legislation aimed at preventing un-enriched battery farming has come into effect.
Poultry meat output in Brazil, Thailand and China are likely to dent US dominance in the years ahead, as competition for feed is heating up. Higher global demand might encourage US arable farmers to export more of their feed, rather than send it for domestic use. Countries may still be buying poultry and egg products grown on US feed but these may increasingly be produced outside of the US.
Not so, however, for the EU. The EU has strict labelling and traceability rules for all food and animal feed containing more than 0.9% GMO ingredients and strong reticence to purchase GMO maize or soya (such as is now widely grown in the US) for animal feed. But no such reticence seems to exist for poultry, eggs, or egg products raised elsewhere on GMO feed, so higher poultry meat import supply is expected in the EU in the year ahead, particularly from Thailand and Brazil.
The situation seems hugely complex and subject to change though, so we hope you'll continue to look out for updates. Perhaps the market is waving, not drowning, but a drought in the US has produced an eggs-trordinarily complex butterfly effect, the whole consequence of which has yet to be seen.