Adjust meat production to stay ahead of economic curve

Adjust meat production to stay ahead of economic curve

CoBank says higher production, increased imports could drive meat prices lower

Expansion of beef, pork and chicken production this year, and a swing in the international net trade balance, has economists thinking that meat prices could be eroding.

Related: With a soft grain trade, cattle may follow

In a new report, "U.S. Protein Supply Heading Higher in 2015-16," CoBank's Knowledge Exchange Division says the erosion is expected over the next two years.

Sparked by profitability in 2014, total red meat and poultry production in the U.S. is forecasted at 95 billion pounds in 2015, which is an all-time high.

CoBank says meat production, increased imports could drive prices lower

Trevor Amen, an economist in CoBank's Knowledge Exchange Division and author of the report, says production levels are forecasted to continue to expand, albeit at a slower pace in 2016 as margins contract.

Beef per capita supplies are expected to be flat in 2015 as today's herd rebuilding efforts promise to bring sizeable increased output in the future, but most likely not until 2017 and beyond.

Pork and broilers are expected to each contribute nearly 6% growth rates in per capita supplies in 2015 as both industries are recovering well from productivity issues faced in 2014.

Outlook remains generally positive
Amen noted that the outlook for U.S. meat production growth remains positive, but several factors are combining to dampen the robust growth rates the industry is experiencing in mid-2015 including a stronger dollar which is encouraging imports and hindering exports to the international market.

Related: New webcast covers beef industry hot topics

As the economic incentive shrinks to grow supplies as prices adjust downward, industry participants will need to adjust production plans accordingly as they seek to find supply and demand equilibrium.

"The U.S. animal protein industries must remain focused on disciplined supply growth, while increasing global demand for U.S. products and improving market access along the way," Amen said. "The production to export ratio will be an important factor to watch as the beef, pork and chicken industries continue the expansion phase."

Source: CoBank

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