Will Inflation Test Consumers’ Appetite for Meat?
Although pent-up demand has been a tailwind for the U.S meat industry in recent months, CoBank said the full effect of inflation is expected to test consumers’ appetite for meat during the fourth quarter.
In its latest quarterly report, CoBank noted the extraordinary strength in the U.S. meat and poultry complexes throughout the summer due to returning demand from the food service sector. But what will the fourth quarter bring?
CoBank noted foreign demand for U.S. animal protein has remained robust. Combined U.S. exports of beef, pork and chicken are expected to reach record highs in 2021, increasing 3% over last year. However, labor challenges are dampening productivity throughout the meat industry and is expected to continue into 2022.
African swine fever (ASF) continues to add trepidation to the U.S. pork sector outlook. Roughly 27% of U.S. pork is exported. If ASF is found in U.S. hogs, it could effectively shut down exports overnight, CoBank said.
Meanwhile, pork prices and hog values have responded favorably to tight supplies. Pork cutout prices are up 60% from 2020, and are 40% higher than the five-year average, the report noted. Nearby hog futures eclipsed $120/cwt for the first time since 2015.
“The third quarter usually has the tightest supply of hogs available for slaughter, so ample stocks are usually placed in cold storage in preparation. However, lack of market-ready hogs, tighter production schedules, and exceptional meat demand meant May ending stocks were down 160 million pounds or at 75% of average levels during the prior five years,” CoBank analysts said.
In the Sept. 1 USDA Hogs and Pigs Report, the number of swine on U.S. farms came in at 75.35 million head, 3.9% below a year ago. The swine breeding herd was 6.19 million head, down 2.3% year over year. Pigs saved per litter were up slightly from a year earlier for June-August at a record 11.13 head.
Global pork trade grew an estimated 5% year over year during the first six months of the year, but shipments have slowed significantly in the last three months, analysts noted. Exports of U.S. pork to China dropped 62% from a year earlier during July with some of that volume shifting to Mexico.
“Overall U.S. pork exports are expected to be record large this year despite July dipping 8.5% from a year earlier,” CoBank said.
Read the full quarterly report here.
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