We have an interesting perfect storm occurring that has created the current commodity conundrum. The supply of protein is inadequate to handle current demand, so protein prices are robust. We had phenomenal weather this year throughout many of the growing regions of the world; the United States and Brazil had near record crops for corn, soybeans and wheat. The U.S. row crop farmer is teetering at or below break-even costs for the first time since 2006. The percentage of the world crop that it takes to sustain ethanol production is at an all-time high. The dollar started showing more muscle than it has in years, and the rest of the world economies are very anemic, reducing demand. We have been preaching globalization for years; the current market reinforces that. The commodity business is truly a roller coaster and here we go again.
Poultry producers are able to act much faster because of their shorter growing cycle, enabling them to increase production to take advantage of demand and steal market share from other proteins. Pork suppliers are still recovering from the PEDv outbreak. The cycle time for production increase in pork is approximately nine months, whereas production time for beef is approximately 18 months. The market futures traders sense oncoming increase in supply for beef and pork as producers increase production to take advantage of inexpensive feed ingredients and good markets.