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Chicken Farmers Keeping Up With Rising Grain Costs

Manitoba chicken producers are holding their own so far against the high price of feed grain but they admit it’s a struggle to keep up with rising costs.

“The pressure is there,” said Jake Wiebe, Manitoba Chicken Producers vice-chair.

Wiebe said he currently pays an average of $376 a tonne for feed on his broiler farm near New Bothwell. Last July it was $312 a tonne, or 20 per cent less. Feed makes up nearly half of a chicken producer’s production costs.

Fortunately, producer prices for chicken have risen, too. The farm gate chicken price in Manitoba for the current A103 production period is $1.54.5/kg (live weight), up from $1.43.76/ kg a year ago.

Wiebe said he’s close to recovering his cost of production but it varies from producer to producer.

“I have to say that we’ve been very fortunate. I don’t want to paint a bleak picture.”

Unlike other supply-managed commodities such as dairy and eggs, Manitoba chicken prices are not regulated by a cost-of-production formula. Manitoba Chicken Producers negotiates directly with the province’s two chicken processors, Dunn Rite Food Products Ltd. and Granny’s Poultry Co-operative, to set prices for each production period, which in Manitoba is 7.4 weeks long. The A103 period expires April 23.

Along with most other provinces, Manitoba prices off Ontario’s producer price to a large extent. Because Ontario produces roughly a third of all chicken in Canada, it is traditionally a bellwether for prices.

Ontario’s producer price does reflect cost of production. It includes components for feed and chicks, which make up 70 per cent of a producer’s costs. It also includes a producer margin component.

As a result, an increase in feed prices translates into a higher value for the feed price component, resulting in a higher live price for Ontario. Since Manitoba prices off Ontario when negotiating with its processors, producer costs are more or less covered here, too.

“We have the ability to keep pace, probably more so than some of the other non-supply-managed meat commodities,” said Wayne Hiltz, Manitoba Chicken Producers general manager.

But Hiltz said there is a time lag in recovering higher feed costs, since the industry is always pricing one production period in advance.

Hiltz and Wiebe spoke ahead of the April 13 Manitoba Chicken Producers annual meeting in Winnipeg.

According to Chicken Farmers of Canada, the sharp rise in grain prices beginning last summer was a major concern for the sector. Feed prices then stabilized briefly, causing producer prices to drop slightly in 2010 from their highs in 2008 and 2009.

However, producer prices began to recover in early 2011 as feed prices started escalating again, CFC said. [email protected]




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