Economic Growth Increases Consumer Demand for Animal Proteins

( Jennifer Shike, Farm Journal's PORK )

Meat animal production is on the upswing and USDA economist Mildred Haley expects pork production to increase 3.5% to 28.3 billion pounds in 2020 in response to higher international pork prices caused by pork deficits in China resulting from African swine fever (ASF). 

Anticipated higher international pork prices brought on by ASF-driven losses in China are predicted to accelerate farrowings in late 2019 and on in to 2020, she reports. 

In the May USDA Economic Research Service Situation and Outlook Report, Haley said most animal proteins will increase in 2020, including beef production by almost 1%, broiler production by 1.3% and other chicken by 1.4 %. Even turkey production is expected to increase for the first time in three years by 1%. 

What’s driving higher production? Haley said producer responses to forecasts of continued positive U.S. economic conditions, including improved producer returns.

Prices of live equivalent 51-52% lean hogs are expected to average $60 per cwt, more than 10% higher than average prices this year and over 31% higher than hog prices averaged in 2018.

Haley said U.S. pork exports are forecast at about 6.7 billion pounds in 2020, almost 7% above the 6.2 billion pounds estimated for this year. She said this implies that 23.6% of U.S commercial pork production next year will probably be exported, compared with 22.9% this year. 

“This forecast assumes that current trade policies remain in place for the forecast period,” Haley said. “It is notable that despite large export increases next year, per capita disappearance will increase as well. Per capita disappearance in 2020 is expected to increase by more than 1% to about 52.9 pounds per person, compared with the 52.1 pounds forecast for this year.”

In addition, the ERS composite pork retail value is likely to increase almost 2% in 2020, to average in the low $3.80s per pound. Increased per capita disappearance accompanied by year-over-year higher retail prices suggests increased retail pork demand. Forecasts for continued economic growth of the U.S. economy next year accommodate increased consumer demand for animal proteins, Haley said.

First-Quarter Pork Exports Dashed by Tariffs
U.S. pork exports are down almost 5% lower than a year ago in the first quarter of 2019. Shipments to major markets were lower, Haley says , due to either in-place retaliatory tariffs (Mexico and China) or to trade agreements to which the U.S. is not a party (Japan). 

Mexico exports were down 15.2% from a year ago. China was down 23.5% from first quarter of 2018. 

“Going forward, the ASF-related impacts on the Chinese hog inventory are expected to lead to significant increases in demand for imported pork,” Haley says. “A probable scenario is for Chinese excess demand for imported pork to progressively drive world pork trade dynamics. High Chinese pork prices can be expected to draw large volumes of imports from pork-exporting countries. For the United States, this could mean that significant shares of increased U.S. pork exports may back-fill pork diverted to China by other pork-exporting countries.”

She said U.S. pork may find itself under competitive pressure in a number of price-sensitive markets. In addition, higher pork prices may also affect exports to countries where U.S. pork faces ad-valorum tariffs.

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