AP: Record Corn Prices Mean more Expensive Dairy, Meat

As long predicted [May 27: Update on Corn and Livestock] the chickens (couldn't resist) are coming home to roost.... as always we are early and you never know when a thesis will hit critical mass. But as I've been repeating I think "oil" will be replaced with "food" as the inflation of choice for the news channels to stress over later this year and into early 09.

I will say the action this week in iPath DJ Livestock ETN (COW) was very encouraging. [Apr 23: Initiating iPath DJ Livestock ETN (COW) - Make up your own Farm Animal Headline]

I've mentioned this name, iPath DJ Livestock ETN (COW) recently as a play on the twin tower effects of (a) governmental ineptitude (ethanol boondoggle) and (b) Fed induced grand larceny against savers and lower/middle class (inflation). While I could see grains having a short term setback if the dollar strengthens, I do believe meat inflation is going to be the next shoe to fall, as producers cut back, creating the next shortage.

The weighting is currently 60% cattle, 40% hogs. Either way, get your freezer stocked up, by Labor Day those BBQs are going to cost a pretty penny. Inflation will eventually push up the value of all finite resources... including stocks! (always a bright side)

Here comes said chickens....

• Raging Midwest floodwaters that swallowed crops and sent corn and soybean prices soaring are about to give consumers more grief at the grocery store.
• In the latest bout of food inflation, beef, pork, poultry and even eggs, cheese and milk are expected to get more expensive as livestock owners go out of business or are forced to slaughter more cattle, hogs, turkeys and chickens to cope with rocketing costs for corn-based animal feed.
• ...experts say the trickle-down effect could be more dramatic later this year, affecting everything from Thanksgiving turkeys to Christmas hams.
• ...pork supplier...high corn costs were already forcing producers in his industry to cut back on the number of animals they raise.
• "There's definitely liquidation of livestock happening," and that will cause meat prices to rise later this year and into 2009, said Brenneman, who is also the vice chairman of the American Meat Institute.
• It's a similar story for U.S. beef producers, who now spend a whopping 60-70 percent of their production costs on animal feed and are seeing that number rise daily as corn prices hover near an unprecedented $8 a bushel, up from about $4 a year ago.
• "This is not sustainable. The cattle industry is going to have to get smaller," said James Herring, president and CEO of Amarillo, Tex.-based Friona Industries, which buys 20 million bushels of corn each year to feed 550,000 cattle.
• "We're in survival mode now," said Paul Hill, chairman of West Liberty Foods, a turkey processor based in West Liberty, Iowa. He estimated U.S. turkey producers will reduce their flocks by 10 to 15 percent nationwide, a cutback that will send consumer prices dramatically higher.
• If corn were to rise to $10 a bushel, Richard Lobb, spokesman for the National Chicken Council, said recouping costs through higher retail prices may not be possible. "Can you possibly charge enough for the chicken to recoup that investment?" he said. "That's a question no one can answer yet because it's never been done."

Send your thank you notes to your local Congressman/women who votes "yes" for corn ethanol! And for the 50th time - please stock up your freezer with meats... immediately.

Long iPathDJ Livestock ETN in fund and personal account