Source: Meating Place
Prominent meat industry analysts Paul Aho, Steve Meyer and Randy Blach presented their latest research at the Annual Meat Conference, and provided the audience with plenty of food for thought on where the poultry, pork and beef markets are heading.
1. HPAI MIA: While avian influenza has been a huge problem for turkey and egg production, Aho (of Poultry Perspective) explained that it had far less impact on broiler production, mostly because of the scattered nature of the broiler industry. While the epicenter of the latest HPAI outbreaks were in the Upper Midwest – where, coincidentally, huge centers of egg and turkey production are based – broiler production stretches across a wider range and encompasses tens of thousands of contract farms. That fact prevented the virus from spreading as easily as among layers, Aho noted.
2. An oversupply problem: Deboned chicken breasts and wings, Aho reported, have experienced a similar trajectory – very high demand during the pandemic, strong price increases in response to that demand and then resulting production boosts (and breeding improvements) that have now leveled prices. Both proteins, Aho predicted, will be a “real bargain” in 2023.
3. Anti-vaccine: Aho also detailed the controversy over a vaccine for HPAI. Despite rumblings for a vaccine mandate in response to the deadliest HPAI outbreak ever, there has been resistance among processors because of how the vaccine could impact exports. Many countries, Aho said, would likely restrict their imports of U.S. poultry if the birds were vaccinated against avian influenza.
4. Prop 12 response “any day”: Meyer, of Partners for Production Agriculture, shared numerous insights on the pork markets, including that the Supreme Court’s decision on California’s Proposition 12 is expected “any day now.” Meyer, though, was clear on what the court’s decision can and cannot do. While the court was, in his interpretation, skeptical of Prop 12 and its regulation of interstate commerce, Meyer was clear that if the court rules against California, it merely allows further legal challenges to continue in lower courts. So the Prop 12 legal fights, Meyer said, are not going anywhere.
5. Pork export upheaval: Meyer was clear in his assessment: “I don’t think China is coming back, folks.” After the considerable decline in Chinese imports of U.S. pork in mid-2021, Meyer does not see the country returning to the record imports of 2019 and 2020, especially with U.S. tariffs on pork exports to China standing at 40% (versus 15% for other countries). Meyer clarified, though, that if China imports pork from other markets, that will open new opportunities for U.S. pork exports and he expects success in Mexico, Japan, Korea, South/Central America, and Caribbean countries.
6. “Significant downsizing”: Closing things out was Randy Blach, the CEO of CattleFax, who detailed the “significant downsizing” taking place in the U.S. cattle herd. Drought is the single driver of the liquidation, Blach explained, with about 55% of the nation’s cattle production occurring in areas with extreme and exceptional drought. As a result, beef cow inventory is expected to drop to 28.5 million by 2025, which would be even lower than the drought years of 2013 and 2014.
7. Cattle slaughter changes: With cattle liquidation still continuing, Blach is anticipating big changes to slaughter numbers. After seeing high harvest numbers in 2022, Blach expects steer and heifer slaughter to drop by 2.5 million by 2026, and for Saturday harvests – which have remained elevated for years – to decline notably in 2023. And with interest rates being where they area, Blach is not expecting a rebound resembling the one the industry saw in 2014 and 2015.
8. “Not rocket science”: With supplies continuing to fall and demand remaining strong, Blach said the end result is “not rocket science … We will see lean prices get higher.” Blach is projecting price increases across all grades, with cutout prices rising all the way to 320 cwt by 2026.
