Camilo Thame, Business Reporter

Dr. Keith Amiel, president of the Caribbean Agri Business Association, and executive of Caribbean Broilers. - FILE

Local feed manufacturers have began to feel the pinch from seemingly unrelated energy legislation enacted in the United States just over a year ago to almost double the blend of renewables into America's fuel supply in another six years.

The consequent increase in demand for grains has pushed world prices higher, with local producers in Jamaica saying the higher prices have been pushing up the cost of local feed.

Increase renewable fuels

Hi Pro Feeds says it expects to increase prices to livestock farmers by another six per cent by the end of the year.

The U.S. target set August last year to increase renewable fuels from just under four billion gallons to 7.5 billion gallons by 2012, meant that corn growers would have a guaranteed market for around 2.6 million bushels of the grain within six years, or 86 per cent more corn than was used last year to produce ethanol in 2005.

According to the U.S. Department of Agriculture (USDA), ethanol production adds 30 U.S. cents to the value of a bushel of corn; while the Renewable Fuels Association (RFA) says ethanol production adds US$4.5 billion to U.S. farm income annually.

But the tugging effect of the existing demand of livestock farmers and feed manufacturers internationally and in the U.S., which consume nearly 60 per cent of U.S. corn, has placed inflationary pressure on the price of the grain.

According to the U.S. grain council, the cost of corn has increased by 18 per cent between January and September this year, rising from US$104 to US$123 per metric tonne.

Several price increases

That, coupled with the high cost of oil, the rising corn price, which makes up 60 per cent of local feed millers cost, has forced them to raise the price of feed several times this year "in small increments."

"Up to this point the island's feed millers have absorbed most of the costs instead of passing them on to the consumer," said Conley Salmon, vice-president of marketing feeds ad agriculture supplies at Jamaica Broilers. "This situation is not sustainable. The next increase should be in the region of six per cent."

Broilers, which owns and operates Hi Pro Feeds, saw its operating margins, excluding administrative cost and goodwill, decline from $456 million, or 15 per cent of the $3.04 billion in revenue made for the year to June 30, 2005, to $399 million, or 12.8 per cent of the $3.12 billion it made this year.

"Most experienced sellers of grain expect the price of the commodity to continue to go up," said Salmon.

Caribbean Agro Business Association president, Dr Keith Amiel, who is also an executive at Caribbean Broilers, which owns and operates NutraMix, agrees with Salmon that the price of US corn will remain high, but noted in an interview with Wednesday Business, that growing the raw material locally would be more costly.

"There is a distinct possibility that we could grow corn and soy bean in Jamaica, or use cassava as another alternative," Amiel said. "But the cost of growing (cassava) here is so high that we could import it from halfway around the world in the Philippines, and still produce feed cheaper."

However, Amiel noted that research and development could help improve the cost of growing the grain locally, to reduce the dependency on foreign grain as well as stabilise the cost of milling feed locally, as is the case in Belize where corn is grown, and in Guyana and Suriname where short-grain rice is used as an alternative.

Ultimately, Amiel believes that improved husbandry practices could immediately alleviate the financial pressures of rising input costs.

"For instance, studies have shown that pig farmers in Jamaica lose as much as 12 per cent of feed by feeding the pigs on the ground, and by not using troughs," said Amiel.

camilo.thame@gleanerjm.com