Recent changes create 'new normal' for poultry industry

by Bryan Salvage
Share This:

ATLANTA, -- Challenges remain for the poultry industry because the volatility surrounding the industry seems to increase at more rapid pace, according to Mike Donohue of Agri Stats. Mr. Donohue said this while addressing finance and accounting managers at the recent 2010 Financial Management Seminar, sponsored by U.S. Poultry & Egg Association's Poultry & Egg Institute.

Current trends in the broiler, turkey and egg industries were examined by Mr. Donohue, who reminded the audience that his theme ‘A time of Challenges for the Poultry Industry' was essentially a continuation of the past two years.

"The industry must recognize that these changes have created a ‘new normal' and adjust accordingly,” he said. “As an example, we need to expect corn prices at $4.20 – $4.40 per bushel. Corn may never return to what were traditional levels of $2.50, since so much of the crop is being diverted to ethanol production and the price is now driven more by speculation than at any time in the past.”

Bank-lending trends were covered by Carl Blackham of BMO Capital Markets and Anthony Bahr of CoBank. Mr. Bahr's statement ‘what a difference a year makes' reflected on what he considers improved credit markets for borrowers.

“The U.S. appears to have emerged from recession, but economic growth still is somewhat subdued for this point in the cycle,” he added. “However, the U.S. is ahead of the E.U. and Japan in recovery cycle and is poised to lead a global recovery.”

Last year "was the worst credit market in many years, perhaps in our lifetime, but things are showing improvement," Mr. Blackham acknowledged. He added that merger and acquisition activity, which was at a 15-year low in 2009, has turned the corner in 2010, although most of he recent deals are much smaller than in the past.

"With cash shown on the balance sheets of investment grade companies currently at 60 -year highs, many firms appear to be sitting on the sidelines waiting for just the right deal or waiting for the European financial crisis to be resolved," Mr. Blackham said.

Markets are generally improving for borrowers and that refinancing opportunities are available, but borrowers should consider refinancing sooner than later, he noted.

Developed by a committee of experienced industry professionals, the program also featured updates on domestic and global poultry markets, taxes, an economic outlook, and provided detailed guidance on other industry-specific financial topics.

Comment on this Article
We welcome your thoughtful comments. Please comply with our Community rules.

 

 


The views expressed in the comments section of Meat and Poultry News do not reflect those of Meat and Poultry News or its parent company, Sosland Publishing Co., Kansas City, Mo. Concern regarding a specific comment may be registered with the Editor by clicking the Report Abuse link.