Over the past few years, the chicken, beef, and pork industries have suffered from a combination of drought, elevated grain prices, disease, and productivity issue. However, in 2015, those challenged are giving way and meat supplies are on the rise, according to a CoBank report available here.
At mid-year 2015, the total supply of U.S. red meat and poultry per capital was on pace for 4 percent growth for the year as a whole, the fastest rate since 1976. In addition, Cobank predicts that the total per capital meat supply is expected to continue to grow through 2016, albeit at a somewhat slower pace. The two main drivers behind this surge are record meat production in the United States and a shift in the international net trade balance.
With each protein species at a different state of its supply cycle, some are growing much faster than others. Beef supplies per capital are not expected to grow at all in 2015, after eight years of trending downward. The cattle industry’s current herd rebuilding efforts will eventually yield sizeable increases but most likely not until 2017 and beyond.
Meanwhile, chicken and pork supplies are each expected to contribute nearly 6 percent growth rates in per capital supplies in 2015, as both industries are posting strong recoveries from productivity issued faced in 2014.
Pork faces a vastly improved supply outlook than it did a year ago. Last year, the porcine epidemic virus (PEDv) reduced hog slaughter levels and pushed prices to record highs. At the same time, sharply reduced feed costs expanded margins and created a healthy profit environment. Those conditions set the stage for a rapid industry expansion. A quicker than anticipated recovery from PEDv contributed to a 7-percent increase in pork production in the first half of 2015.
Chicken will contribute the largest increase to the total meat supply in 2015. The industry’s return to normal hatchery flock productivity, along with challenges in the export market, will push the chicken supply per capital to nearly 90 pounds per person by the end of 2015, up about 6 percent from a year ago. Trade bans on all U.S. poultry products have been imposed, as a result of avian influenza, even though broilers were not significantly affected by AI, add up to an estimated 18 percent of last year’s U.S. export volume. Leg quarter prices, a traditional export product, has been significantly impacted and has also been a major contributor to elevated cold storage inventories in chicken.
In 2016 and 2017, chicken and pork supplies will grow much slower. Meanwhile, gains in beef supplies will pick up steam.
With the abundance of supply, meat prices are expected to erode over the next two years. Meat prices have already slipped from the record-high levels posted in 2014. Price pressure will vary across the animal protein complex, with poultry and pork prices predicted to be the most vulnerable. Those closer to the consumer will be in a more favorable margin position and those closer to production will likely face compressing margins, CoBank said.
