Your Reading List

Animal industry entering a mini-boom period

Animal industry entering a mini-boom period

In 2007, meat consumption per person in the U.S. was 219 pounds for the big four of beef, pork, chicken, and turkey. Current USDA estimates for this year are down to 199 pounds per person, nearly a 10 per cent decrease in seven years. In percentage terms, consumption of beef has been down 17 per cent, followed by 10 per cent for both pork and turkey and a more modest three per cent for chicken.

Why would U.S. consumers be eating so much less meat? Some argue that diets have changed and U.S. citizens have made lifestyle changes that include less meat. There is probably some truth to the lifestyle change hypothesis, but three other factors are more important.

The first of these is that retail meat prices had to rise sharply for animal producers to cover the much higher costs of feed from the 2006 to the 2012 crops. Retail prices of beef and pork in 2014 are about 40 per cent higher than in 2007. People simply eat less meat when prices rise quickly.

High feed and forage prices forced a national beef cow reduction of 12 per cent from 2007 to 2014. In addition to high feed costs, Southern Plains producers had the additional problem of widespread drought. As a result of the double whammy, producers liquidated 21 per cent of the beef cows in that region, which is the largest production region.

A third critical factor reducing U.S. consumption of meats is related to domestic and foreign incomes. Domestic incomes were under pressure in the financial crisis of late-2008 and 2009 setting off the “Great Recession.” While U.S. consumers were under pressure, incomes in developing countries were rising. This caused U.S. meat exports to rise, pitting foreign consumers against domestic consumers for the limited U.S. meat supplies.

The next era for animal industries will be one of rebuilding herds and flocks. This will be a multiple-year process. If the years from 2007 to 2013 could be described as the “Grain Era” in which crop sector incomes had an extraordinary run, the coming period may be described as the “Animal Era” when producers of animal products have strong returns. During the “Grain Era” some resources like pasture land and forage production were converted to cash crop production. In the coming “Animal Era” there will be some incentive to convert cash cropland back to animal industry use.

Feed prices are much lower, drought continues to abate in the Southern Plains, and the U.S. economy continues a slow but steady process of bringing more families back into the workforce.

So, how much of the 20-pound-per-person reduction in meat consumption will the animal industries recover in coming years? The answer depends on the magnitude of the changes in the drivers. As an example, 219 pounds of meat consumption per person was based on a period when corn prices averaged about $2 a bushel and soybean meal $200 a ton. As feed prices reset in the coming era, few believe feed prices will drop back to those low levels. Given current expectations for feed prices in coming years, a recovery of 10 to 12 pounds of the lost 20 seems like a reasonable estimate.

Animal industries are expected to be in a mini-boom phase in coming years led by rising per capita consumption, continued small growth in U.S. population, and growing export demand. An important determining force of how big the boom will be will depend to what level feed prices reset.

About the author



Stories from our other publications