USMEF chair sees better days ahead for the red meat industry
Even though the US red meat industry was impacted by the coronavirus situation in the last three months, US Meat Export Federation's (USMEF) chairman Cevin Jones is optimistic about the chances of a strong comeback for the US exporters of beef and pork. "Even as COVID-19 disrupted export markets in the first quarter of 2020, demand for high-quality red meat remains strong. USMEF continues to forecast record levels of exports for US beef and pork in 2020, based on global demand and supply fundamentals.
On the supply side, analysts are forecasting a significant drop in global pork production in 2020 due to ASF in China and Southeast Asia. For beef, analysts expect a double-digit slowdown in Australian production and exports. As for demand, trade agreements with Japan and China are opening new doors for US red meat," Mr. Jones said while forecasting a shortage of "several million tonnes of pork in the Chinese market".
The coronavirus pandemic is not stirring only logistic issues but safety concerns and a shortage of labor in the processing sector, as some of the employees in the sector have been infected while others have remained home to take care of their children. Two JBS beef processing plants in Colorado and Nebraska are at risk of being closed, while Tyson Foods announced that "out of an abundance of caution", it has suspended operations at our Columbus Junction, Iowa, pork plant this week due to more than two dozen cases of COVID-19 involving team members at the facility.
The impact of COVID-19 pandemic has been analyzed by CoBank experts and, in their opinion, April is coming with negative margins before those will turn to positive territory this summer. his quarter will largely define the next year in terms of the economy and how severe the damage caused by the coronavirus will be," said Dan Kowalski, vice president, Knowledge Exchange, CoBank. "Nearly everyone will be impacted to varying degrees and the pace of the recovery will be uneven. But the economy had been on good footing and it's entirely possible that we can get back to reasonable strength within a few quarters."
The US cattle complex has seen a swift and sharp decline in the last month following the drop in global equities and oil prices. Since mid-January, April live cattle futures have fallen by approximately 25%. The beef complex profit pool is shifting in favor of packers at the cost of lower feeding margins. The loss of restaurant and foodservice customers due to COVID-19 will test beef prices this spring.
China's demand for US pork has set export records, but it hasn't led to strong prices or profit margins. While international demand has been significantly higher than last year, so has US pork supply. Hog producers are expected to realize negative margins through April before margins turn to positive territory this summer. To realize strong margins, producers will need strong export growth to continue, it is said in the latest market report from CoBank.
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