Poultry Industry

Vikon Farms, a specialty poultry processing company announced plans in September to hire 170 people and invest $5.4 million in a former Petit Jean poultry plant in Arkadelphia, AR. The company plans to create jobs outside the plant by contracting with growers from El Dorado and Union county along with a Vikon supported hatchery in Prescott, AR. Vikon Farms specializes in chickens that are free range and antibiotic free. The company serves a number of primarily Asian markets.

OK Foods of Ft. Smith, AR, the 17th largest poultry company in the U.S., sold their operation in early 2012 for $93m to the largest poultry company in Mexico, Bachoco. In 2012, they added 182 new jobs in the Ft. Smith and Heavener, OK processing plants due to a $7m expansion, primarily in deboning and further processing. They recently bought the Morris hatchery hatching egg complex in Hermitage, AR.

George’s, Inc. of Springdale, AR, is the 12th largest poultry integrator. They produce 19.56 million pounds of ready-to-cook chicken per week, as of 2013. Simmons Foods of Siloam Springs, AR, is the 15th largest U.S. poultry company. They have 1241 contract broiler houses and 4700 employees. They produced 13.26 million pounds of ready-to-cook chicken last year.

Cargill has recently opened a $250 million broiler production plant in China. It has the capacity to process 65 million chickens and 176,000 tons of poultry products annually, about 1 percent of China’s poultry production capacity. In 2012, chicken consumption in China exceeded 13 million tons, the first time that more chicken was eaten in China than in the US, according to a study released by the Chinese Academy of Agricultural Sciences in July. Cargill plans to invest another $50 million to establish a deep-processing plant in Chuzhou. This plant is expected to open next June. The fully integrated project will feature 12 broiler breeder plants, 35 chicken farms, one slaughterhouse, one feed plant and two chicken processing factories.

China’s poultry industry has been expanding with annual growth of 5-6% due to increasing incomes. It is projected that 234 million Chinese will enter the middle class by 2020 with anticipated 40% increase in meat consumption. Cargill opened its first poultry complex in Russia, costing $40 million dollars, to supply McDonalds restaurants in Russia with chicken.

Koch Foods, the 7th largest poultry company, will expand its poultry processing facility in Hamilton, Georgia, creating 750 new jobs and investing $49 million. Koch purchased an existing Cagle’s facility in 2012.

Cobb-Vantress is a primary breeder company headquartered in Siloam Springs. They recently constructed a new $51 million feed mill in Albany, KY to serve its expanding operations in S. KY and N. TN. It is estimated to be completed by spring 2014. They had already spent $36 million in the past 3 years building a new hatchery in Lafayette, TN and a research and development facility in Deer Lodge, TN.

Corn and soybean production suffered from summer 2011 and 2012 drought, while prices increased substantially. Corn production fell 13% due to the severe drought from June 2012 through January 2013, a drought not seen since the 1930’s and 1950’s. Over 62% of US farm land suffered from this drought. The 2012 corn harvest totaled 10.78 billion bushels, down 12.26 billion bushels from 2011 and the lowest in 6 years. Nationally, 97.4 million acres of corn (the most since 1937) were planted in 2013.

USDA is now estimating total 2013 corn production at 13.8 billion bushels, which if realized, would result a new record for annual U.S. corn production. Total U.S. corn production was 10.8 billion bushels in the drought year of 2012, 12.3 billion bushels in 2011, and 12.5 billion bushels in 2010. USDA left the anticipated harvested corn acres at 89.1 million acres, which is unchanged from the Aug. 1 estimate. The projected season-average farm price for corn was lowered 10 cents at both ends of the range to $4.40 to $5.20 per bushel.

Midwest cash corn for April 2014 is about $4.67/bushel down considerably from $6.25/bushel in June 2012. Sep. futures are at $4.91/bushel.

China, the world’s largest pork eating country, is buying substantially more U.S. soybeans to feed their hogs. This is draining U.S. soybean reserves to the lowest level since 1965, up 22% from a year ago. Soybeans may reach $16/bushel in 2014, up from 2013 prices of $13.50 per bushel.

Midwest cash soybeans for April 2014 is about $15/bushel, with Aug. futures at about $14/bushel.

Increased demand for corn and soybeans is partly the result of U.S. corn production into ethanol production and soybeans into bio diesel. About 11% of US corn was used for ethanol production in 2002. Now, about 35% of U.S. corn production is projected to be converted into ethanol from 50 ethanol plants built in the last few years. Ethanol production has risen from 3.9 billion gallons in 2005 to projected 13.8 billion in 2013 and further increasing to 14.4 billion gallons in 2014.

Finally, Congress let the ethanol subsidy expire on 12/31/11, ending an era which the government provided more than $20 billion in subsidies! The U.S. government subsidized $.51/gallon of ethanol produced for 4 years. Approx. 10% of the U.S. gasoline supply is now ethanol.

In January 2011, the EPA endorsed going up to a 15% ethanol blend as safe for cars and light duty trucks, up from the 10% limit previously. Because of this increased ethanol production, the poultry industry, as well as all livestock feeding operations which rely heavily on corn, are looking at a likelihood that of a permanent shift up in the price of corn. It is hoped that the expiration of the ethanol subsidy will decrease the volatility in the corn market. Biodiesel which uses soybeans to produce vehicle fuel has a government subsidy of $1/gallon for petroleum refiners who purchase or blend biodiesel. The U.S. Government mandated 800 million gallons in 2011 and raised it to 1 billion gallons by 2013. Soybeans account for 55% of biodiesel with canola at 14%, recycled cooking oil at 12%, animal fats at 14%, and corn oil from ethanol plants at 8%.

With the U.S. population at approx. 316 million, there are only about 2 million farm operators, or .6%, with only 800,000 classified with farming as their principal occupation. For 2012, the preliminary Census of Ag indicated a total of only 2.1 million US farms, down 4% form 2007 Census of Ag numbers. The average age of the farmers is getting older also, at 58.3 years. The amount of farm land also shrank from 922 million to 915 million acres in the last 5 years. At the same time, the average farm size grew from 418 to 4343 acres. Most US farms are small with 75% of them with sales of less than $50,000.

Arkansas ranks #3 in US broiler production, behind Georgia #1 and Alabama #2. Poultry products account for 30.6% of Arkansas agricultural receipts. Washington County is the #1 broiler producing county in AR and Benton County is second.