I don't think it is an exaggeration to say that a global reset is taking place in the meat production complexes throughout the world. It was brought about by the political subsidies related to ethanol and bio-fuels coupled with the increased demand from emerging nations.
For the United States and therefore for everyone else around the globe, the particular factors which have led us to a low relative value of the dollar is making the stew a little more complex. The sub-prime mess which halted the steadily advancing rise in US interest rates along with the decision by China to raise its own interest rates in the face of mounting inflation and their decision to at least allow their currency rates to change (though not strictly with the market) have led to a mixed bag of blessings for U.S. exporters of pork and beef.
The mixed part of the blessing is our plunging interest rates and the EU's determination not to follow yet (which would lower the value of the euro and cause their effective price of oil to jump--an inflationary problem) have made U.S. commodities of all kinds increase in demand. This has meant steadily increasing exports of pork for instance but has also meant that our feed grains, though through the roof in price, are also relatively cheaper to buy than in other areas of the world. This triple fold demand for feed ingredients: 1. internal demand from U.S. pork, poultry and beef production, 2. internal demand from the burgeoning ethanol production, 3. external demand for U.S. commodity crops has resulted in prices for corn and soybeans that are approaching and in some cases surpassing by a factor of two, the intial increases forecasted by USDA and other entities when ethanol impacts were considered in isolation. Policy made on these assumptions will need to be reviewed, but will it be? Its the only bi-partisan thing going in Washington.
This multi-dimensional set of impactors (along with the drought sequences that have uniquely impacted wheat for an extended period of time on a global basis) is causing smart people to be very careful about using the old rules of thumb on how prices are expected to move with respect to crop production levels, meat production levels and even stocks to use ratio's. All have their place still but the unintended consequences and normal consequences of this amazing set of circumstances will create new rules and require a wider, more global focus to understand what happens next.
