In this file:
∑ Meat demand is the story of the decade
∑ Strong demand supports U.S. livestock sector
Meat demand is the story of the decade
Prime Cuts with Steve Kay
By Steve Kay, Canadian Cattlemen
December 1, 2017
Kay is publisher and editor of Cattle Buyers Weekly
Lest anyone in the North American livestock industry forget, all wealth to the industry comes from consumers at home and abroad. Cattle and hog producers might feel far removed from those consumers. But they are the people who determine whether producers can make a living or not.
The industry to its credit has recognized this more and more in the last 20 years. A huge amount of effort has gone into understanding better what consumers prefer and producing beef and pork products that satisfy those preferences. Thatís why, for example, the beef industries in both Canada and the U.S. focused heavily on producing a more consistent product and why beef processors moved rapidly to producing cuts with minimal outside fat.
All this has meant that consumers in North America now enjoy the highest-quality beef and pork products, fresh or further processed, in history. They also have the largest array of meats to choose from in terms of how they were produced. For example, consumers can buy conventionally produced beef, beef produced without the use of growth promotants or antibiotics, 100 per cent grass-fed beef and organic beef either grain- or grass-fed. Consumers are spoiled for choice compared to 20 years ago.
Red meat consumption is thus on a solid footing. But because the beef industry is still cyclical by nature, consumption is affected by availability. Those outside the industry often claim consumers are eating less beef for dietary or other reasons. This simply isnít correct. Consumers eat more or less beef purely because of availability, which determines per capita consumption. The equation that determines consumption is: domestic production plus imports minus exports, divided by the population.
The U.S.ís severe droughts from 2010 to 2012 sharply reduced cattle numbers and therefore domestic beef production. The result was that consumption fell to 54.2 pounds per person in 2014 and to a record low of 54.0 pounds in 2015. Herd rebuilding had begun in 2014 and production increased. Consumption thus rose to 55.6 pounds per person in 2016. It will increase to 57.6 pounds this year and to 58.5 pounds in 2018. Thatís all because of increased domestic production. Iím amused that those same people outside the industry havenít noted that Americans are eating a lot more beef.
Consumers have stepped up to the plate even more in 2017. The year began with dire predictions, mostly from financial analysts, that the U.S. was going to be buried in a wall of protein, as forecasts were for year-over-year increases in red meat and poultry. The impending wall was going to imperil profits for producers and meat processors and drive down everything from livestock futures prices to companiesí stock prices.
Almost the opposite has occurred...
Strong demand supports U.S. livestock sector
By Pat Westhoff / Special to the Columbia Daily Tribune (MO)
Posted Dec 1, 2017 at 9:43 AM Updated Dec 1, 2017 at 9:43 AM
Westhoff is director of the Food and Agricultural Policy Research Institute at the University of Missouri
Falling prices for livestock and poultry contributed to the sharp decline in U.S. and Missouri farm income in 2015 and 2016. While cattle, hog and poultry prices remain far below the record levels of 2014, prices this year have been surprisingly strong in the face of expanding meat supplies.
Current USDA estimates suggest that total U.S. meat production will increase by almost 3 billion pounds, or about 3 percent, in 2017. That is far faster than the rate of growth in the U.S. population, and would normally be expected to put severe downward pressure on prices.
In spite of the increase in supplies, producer-level prices for hogs and wholesale prices for chickens are both higher this year, and prices for slaughter-ready cattle are about the same.
In any busines, people are happy when they can sell more at a higher price. It is certainly a lot more fun to sell in an expanding market than in one that is contracting.
Increasing U.S. meat exports are on track to absorb almost a third of the increase in meat production this year. Beef and pork sales to foreign markets are both higher, even though trade barriers continue to limit the ability of U.S. meat to compete in many countries.
What is perhaps more surprising is that domestic meat consumption is up by almost 2 billion pounds this year, or about 3 pounds per person.
To some extent this is just a continuation of recent trends. Domestic meat consumption rebounded strongly in 2015 and 2016 after declining by 9 percent from 2007-2014.
One small part of the story may be a slight reduction in the margins between prices received by livestock producers and the prices paid by consumers for meat at the retail level. A weighted average of retail meat prices is expected to be about the same this year as it was in 2016, even though average producer prices are higher.
However, that still begs the question of why consumption is up this year while retail prices are flat. One might have expected that an aging population, health concerns and other factors would cause per-capita consumption to be steady or declining...