Exports will be of increasing importance to U.S. poultry and pork producers as American consumers continue to eat less meat, says John Anderson, deputy chief economist for the American Farm Bureau Federation.
“Right now, we’re looking basically at slow and steady growth in U.S. pork and poultry exports,” he said at the annual meeting of the Mississippi Farm Bureau Federation. “Beef exports are sliding, but I think that’s not so much a problem with our export market as it is a reflection of the lower production we’ve seen.
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“In our domestic market, total meat consumption will increase as the population grows, but it’s going to be tough to see growth in per capita meat consumption. Longer term, the U.S. meat industry will have to be very conscientious about cultivating export markets because U.S. consumers are eating less meat on a per capita basis.
“I think there are a lot of consumer preference and cultural issues behind that — people just don’t eat meat like they once did. We have a lot more diverse food culture, more ethnic foods that are less meat-intensive. Most of us grew up with a big piece of meat on our plate, and that’s just not the way the U.S. eats any more.”
The exact opposite is true in the rest of the world, however, Anderson says. “As incomes rise and lifestyles change, they’re becoming more interested in consuming more meat, so there’s a lot of growth potential in the rest of the world that we need to be in a position to capitalize on.
“I think our meat industries, in general, are doing a really good job of that. I think U.S. meat exports will continue to increase. Foreign consumers will continue to aggressively seek out U.S. beef, but we’re going to have less to sell because of the substantial break in production that’s likely in 2014 as we get expansion going again.”
In the pork sector, he says, “Value of cutouts is at a much higher level than a year ago, which is good. It had dropped pretty sharply recently, and hog prices were down quite a bit. We expect December to be sort of a down time in that market, but if we see it start to drop below year-ago levels, that’s really going to make it hard to see beef prices do a lot more than they’ve done already. We’re going to have to keep a close eye on these competing meats.”
Poultry sector expansion
The poultry industry has been in expansion mode for most of 2013, Anderson says. “We’ve seen a fairly significant week-to-week increase in broiler egg sets. Seasonally, there’s a strong tendency starting at middle of year for egg sets to start dropping pretty dramatically, but this year they essentially stayed level through the summer. That’s pretty remarkable, and I think it’s indicative of the interest integrators have in getting some higher production.
“Broiler production has been consistently higher than last year, and over the last six weeks we’ve had a fairly substantial increase year-over-year in poultry production. This higher production is starting to put some pressure on price.”
A bright spot in the poultry market, he says, has been with boneless, skinless thighs. “These have been a huge success story for the poultry industry the last two years. Demand has grown quite a bit, compared to boneless, skinless breasts, which are at about the three-year average price. Wings, we’re actually below three-year average price.
“Boneless, skinless thighs are still adding a lot of value compared to three years ago.I see these featured a lot more in the supermarkets and I hear a lot more talk about recipes for them — a really hot product for the sector.”
In the poultry market overall, Anderson says, questions are arising as to whether production is overwhelming demand, if we’re going to have to contend with weakness. I don’t think that’s the case.
“I think what we’re seeing is that integrators have got to the point they’ve decided they have enough production coming on that they want to start trying to steal market share from their competitors. They’re getting pretty aggressive in their pricing. It’s not so much that demand is bad; it’s more that they’re trying to throw out some bargains, trying to increase their market share.
“When overall meat demand has been pretty good, when the economic numbers are starting to look quite a bit better, when we’ve got really strong growth of protein consumption in the developing world, it just doesn’t compute with me that we could be looking at a demand side problem with poultry.
“Rather, I think the integrators are really pulling out the stops, trying to move a lot of product now that they’ve got expansion going on, and trying to take market share from competitors and from competing meats. If you’re a grower, I think it’s a positive story.”
Meat export outlook
Broilers should grow “fairly steadily,” Anderson says, and pork exports as well. “We’ll probably be exporting 18 percent to 20 percent of broiler production, 22 percent to 23 percent of pork production, and 8.5 percent to 9 percent of beef production.
“We used to could count on 3 percent to 5 percent increase in broiler production every single year, just like clockwork. That has sort of broken down in last six to seven years as they’ve dealt with high costs of production, as well as some pretty serious export market challenges. I think the sector is finding its footing again and getting back close to its 3 percent year over year expansion figure.”
U.S. pork production for 2014 is forecast to be up about 2.6 percent, following basically flat production in 2013, he says. “The industry is trying to get back in expansion mode. They’ve had some problems with viral diarrhea, which has has slowed expansion in 2013. If they get that under control in 2014, we might see more like a 3 percent increase in production. But if it really blows up and causes a lot of problems in nurseries, it may be hard to hit the 2.6 percent forecast.
“They’ve done a great job of managing it from this point, and I think the expectation is that they will continue to learn how to manage it. There certainly is interest in expansion in the pork sector.”
Fed cattle prices could see a late spring high close to $140, Anderson says. “That’s pretty stout. It would be a record price level, if we actually get there. If we have a normal seasonal year from now to spring in the cash market, that’s about what the market is saying.
“But I do think there’s some downside in this. I think the wholesale beef market has to get better before that price is realistic. If we see this market start to break out to a new level, these prices could start to look realistic. But if we see wholesale beef continue to struggle, if we continue to see pressure building from increased production of other meats, and competing meat prices keep a lid on wholesale beef prices, I think we could be down toward the lower end of the range, the low to mid-$130s. The wholesale beef market is going to be the thing to watch."