US production of beef and pork to decline
US Beef and pork production this year is expected to take a dive of 2%, as domestic demand is also dropping. Inflationary waves in the US economy that started last autumn and supply chain disruption along with a downward trend in the cycle of production will have a certain impact for the American meat industry. Beef production might decline 2% or more; pork production might decline 2%; and chicken production may increase by 1%, according to a USDA outlook for 2022.
However, the problem gets complicated, as analysts, such as Andrew Gottschalk of HedgersEdge.com, point out the reality of low spending power for many of the US inhabitants.
"People experiencing the most harm are those in the lowest income groups. These groups have the greatest impact on beef demand, as they spend to move up the protein ladder when their real wages are increasing. How long it might take for wage gains to again exceed the rate of inflation is the trillion-dollar question. In the interim, risk is increasing that the ongoing decline in real wages could limit demand for beef. The absolute price difference between the competing meats will become prioritized by consumers and beef demand will likely suffer. Relative value will become secondary to consumers in determining their meat purchases, slowing some price advances even in the face of declining supplies," he commented, according to FoodBusinessNews magazine.
The high-profit era may end this year for meatpackers and cattle breeders, as demand will slightly drop and the cost of operations will increase, it is mentioned in HedgersEdge.com's letter for investors. "All this suggests beef processors will not see the kind of astronomical margins they enjoyed in 2021. Fed beef processors at times saw profit margins exceed $900 per head, while cow processors saw margins of $400 per head. Fed beef processors in 2021 made a profit of $562 per head through the first nine months of the year, according to HedgersEdge.com. The first quarter saw margins average $301.38 per head, the second quarter $698 per head and the third quarter $688 per head. October saw profits of $580 per head and November saw profits of $452 per head," the document reveals.
The consumer's interest in animal protein is expected to move to cheaper products and a strat for this trend was already observed in the final quarter of 2021, in the domestic poultry market, when chicken "dark meat" was more consumed than other pieces with added value.
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