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Meat demand is the story of the decade

Prime Cuts with Steve Kay

Lest anyone in the North American livestock industry forget, all wealth to the industry comes from consumers at home and abroad. Cattle and hog producers might feel far removed from those consumers. But they are the people who determine whether producers can make a living or not.

The industry to its credit has recognized this more and more in the last 20 years. A huge amount of effort has gone into understanding better what consumers prefer and producing beef and pork products that satisfy those preferences. That’s why, for example, the beef industries in both Canada and the U.S. focused heavily on producing a more consistent product and why beef processors moved rapidly to producing cuts with minimal outside fat.

All this has meant that consumers in North America now enjoy the highest-quality beef and pork products, fresh or further processed, in history. They also have the largest array of meats to choose from in terms of how they were produced. For example, consumers can buy conventionally produced beef, beef produced without the use of growth promotants or antibiotics, 100 per cent grass-fed beef and organic beef either grain- or grass-fed. Consumers are spoiled for choice compared to 20 years ago.

Red meat consumption is thus on a solid footing. But because the beef industry is still cyclical by nature, consumption is affected by availability. Those outside the industry often claim consumers are eating less beef for dietary or other reasons. This simply isn’t correct. Consumers eat more or less beef purely because of availability, which determines per capita consumption. The equation that determines consumption is: domestic production plus imports minus exports, divided by the population.

The U.S.’s severe droughts from 2010 to 2012 sharply reduced cattle numbers and therefore domestic beef production. The result was that consumption fell to 54.2 pounds per person in 2014 and to a record low of 54.0 pounds in 2015. Herd rebuilding had begun in 2014 and production increased. Consumption thus rose to 55.6 pounds per person in 2016. It will increase to 57.6 pounds this year and to 58.5 pounds in 2018. That’s all because of increased domestic production. I’m amused that those same people outside the industry haven’t noted that Americans are eating a lot more beef.

Consumers have stepped up to the plate even more in 2017. The year began with dire predictions, mostly from financial analysts, that the U.S. was going to be buried in a wall of protein, as forecasts were for year-over-year increases in red meat and poultry. The impending wall was going to imperil profits for producers and meat processors and drive down everything from livestock futures prices to companies’ stock prices.

Almost the opposite has occurred. U.S. beef and pork processors continue to enjoy record large operating margins, and chicken processors are having an excellent year. Cattle feeding margins held up well until recently when they dipped into the red. They are currently recovering as live cattle prices began to rally in mid-September. Cow-calf producers have also enjoyed a fall rally in prices for calves and yearlings.

The U.S is still on target to produce a record 100.5 billion pounds of red meat and poultry this year. Beef production so far this year is up 4.2 per cent on the same period last year. Pork production is up 3.0 per cent and broiler production is up 1.2 per cent. But fears of a meat wall have evaporated. That’s because strong demand for all the proteins at home and abroad has cleared all that extra meat. In fact, demand is on its strongest footing in years and has become the story of the decade.

About the author

Contributor

A North American view of the meat industry. Steve Kay is publisher and editor of Cattle Buyers Weekly.

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