There’s no question that the U.S. has seen a tremendous increase in meat production over the past 40 years. This increase has mostly been driven by productivity, says Warren Preston, Deputy Chief Economist at USDA, at the Ag Outlook Forum on Sept. 23 in Kansas City, Mo.
“If you look at the total impact of productivity, you can see that the inputs have stayed relatively constant, and that output just keeps increasing,” he says.
Over the last few years, cattle and hog inventories have continued to rise in addition to record meat and chicken production. Preston says we’ll continue to see that in 2019. And 2020 looks the same.
“Going continuing into 2020, we expect to see record levels of pork production, beef production and broiler production,” he says.
Although he expects to see some recovery in prices, partly due to growth in trade, he says we’re still going to be well below those 2014 highs.
Some Price Recovery in Sight
Preston expects a season average steer price of $150 cwt. in 2020, which is a bit of recovery from last year.
However, he sees the packer concentration issues coming back to the forefront with the Tyson plant in Holcomb closing down, losing 5% to 6% of the fed cattle processing capacity. When the plant closed, boxed beef prices went up and fed cattle prices dropped to the point where we had record wholesale box beef to live cattle price spreads, he says.
So what does that mean?
“With the relatively inelastic short month supply of cattle and relatively inelastic demand schedule, the plant closed down just as we're leading into the Labor Day holiday,” Preston says. “We saw a really strong demand for choice beef at the same time that we lost 6% of the production capacity. And so we saw that decline in feedlot prices.”
On hogs, he expects some recovery going into 2020 at $59 a cwt. on barrows and gilts versus $49.50 for this year.
“We can expect to capture some of that demand for export markets on the pork side,” Preston says.
He anticipates broilers going up by a nickel. And he sees some continued recovery on the all milk price. It’s forecast at $18.35 for the 2019 calendar year, and up to $18.85 in 2020.
Preston says, “Looking at the relatively stable feed cost, there should be some recovery on the livestock sector as we come into 2020.”
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