Lower feed costs weigh on supply-managed goods

(Scott Bauer photo courtesy ARS/USDA)

CNS Canada –– Relatively soft feed grain prices over the past year mean producers of supply-managed commodities, such as milk and eggs, have also received lower prices for their products.

Such is the interpretation of industry participants accounting for declines in the latest Farm Price Index data released by Statistics Canada.

The livestock and animal products index fell 7.5 per cent in March compared to the same month a year earlier.

Supply-managed commodities also decreased, with the price of eggs down by 4.2 per cent, dairy products down 3.7 per cent, and poultry down 2.4 per cent.

The livestock and animal products index has seen year-over-year declines in each of the past six months, StatsCan reported.

Before that, the livestock and animal products index had been mostly increasing on a year-over-year basis since April 2013, mainly on rising cattle and hog prices, the agency said.

“Feed prices have come down… and interest prices are low, I think that’s the main reason,” said Jan Slomp, president of the National Farmers Union.

In supply-managed sectors, he said, “the costs are in a formula, so when the costs go down, the revenue goes down as well.”

It’s been a very flat market for feed grain in the last year after seeing a decline previously, said Jim Beusekom, analyst at Market Place Commodities.

“The markets peaked out in 2012 to 2014 — there were some pretty high feed prices and since then, the markets have been declining year-over-year, moving back to the levels we see today,” Beusekom said.

Production of eggs, dairy and poultry is very regimented, with farmers constantly gauging production to ensure they are filling the assigned quotas but not overproducing, since they do not get paid for surplus, Slomp said.

This keeps the industry balanced and consumers happy, because they never see a spike in prices, he added.

“I think this is one of the strengths of the system, that the prices do come down if the cost of production goes down,” Slomp said. “It’s an indication of how the system works and is beneficial to all society.”

Erin DeBooy writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow Erin at @ErinDeBooy on Twitter.

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