Animal Protein

The US chicken industry has experienced an unprecedented run of historic profitability since 2012 and responded with a significant increase in production and processing capacity.

Last August when the first cases of African Swine Fever (ASF) were announced in Northeast China, it was immediately clear that the global pork sector would be affected.

U.S. animal protein supplies have reached all-time highs in both production and domestic consumption. 

African Swine Fever

October 2018
African Swine Fever (ASF) is spreading throughout China, the world’s leading producer and consumer of pork. The swine disease — which is feared by every major pork producing and exporting country — has been detected in ten China provinces in the last two and a half months. The Chinese have already culled almost 50,000 hogs in an effort to prevent spreading of the virus.
Costco sells more than 90 million rotisserie chickens each year, so the announcement that plans to build a poultry processing complex in eastern Nebraska raised numerous questions about how the nation's third largest retailer will orchestrate the construction and operation of a $400 million poultry complex.
Beef production in the U.S. is on the rise, and export outlets have never been more important. U.S. beef exports in 2017 exceeded industry expectations and the momentum is expected to continue through 2018 with exports forecast to increase 4-6 percent. However, market access with key partners is creating a heightened level of uncertainty.

Cage Free Eggs

December 2017
U.S. egg production, pricing and producer profitability have been highly volatile over the last two years. The Highly Pathogenic Avian Influenza (HPAI) outbreak in 2015 caused egg prices to surge, incentivizing egg producers to ramp up production and quickly replace the laying hens lost to HPAI. Coincidentally, during the second half of 2015 and into 2016, major food companies pledged to transition to higher cost cage-free production by the year 2025 just as egg prices went into freefall. The result has been an increasing supply of cage-free production amidst a surplus of less expensive, conventionally produced eggs.
Alternative protein products derived from plant sources, insects and cultured meats are one of the top food trends to watch in 2018 and beyond. The effect on livestock and poultry protein demand in the U.S., however, is not expected to be significant.
The U.S. beef cattle herd is still in the expansion phase of the current beef cattle cycle. This expansion will lead to steady growth in beef production through 2019. However, following the most aggressive 3 year start to any expansion on record, inventory growth appears to be decelerating.
Strong balance sheets and rising global demand are incentivizing U.S. pork processors to expand capacity. When the five construction projects underway are complete, packing capacity will increase by 8-10 percent.
Feed mills have enjoyed substantial increases in profitability in recent years as grain prices have fallen, making the cost of their main input more affordable. Driven by the expansions in animal slaughter capacity at the local level, feed mills are bracing for a surge in demand in the years ahead.
U.S. pork consumption is anticipated to grow in close tandem with the U.S. population. Domestic production, however, will continue to outpace domestic usage, further escalating the importance of exports for supply/demand balance and pricing expectations.
Grain handlers are anticipating a flood of orders for feed wheat, which should enable them to move excess wheat inventories out of storage ahead of what is expected to be a record-large fall harvest.
In 2016, U.S. dairy margins are being slugged with a 1-2 punch of soft milk prices and slashed cattle prices. Milk prices have now fallen 40 percent from their high in late 2014. But until a few months ago, dairy producers were partially insulated from this painful decline due to record high cattle prices and lucrative sales of bull calves and cull cows.
As domestic meat suppliers in the U.S. close their books for 2015, they’re looking forward to a better year with fewer hardships in 2016. The coming months will involve a transition away from last year’s supply-dominated marketplace to one that is much more demand-driven.
Cattle prices plummeted from the beginning of August until early October, catching many market participants totally off-guard. In the months leading up to the abrupt downturn, the cattle industry was engaged fully in rebuilding the cattle herd, and those efforts had contributed to a shortage of beef – and higher prices.
Over the past few years, the beef, pork, and chicken industries have all suffered from a combination of drought, elevated grain prices, disease, and productivity issues. In 2015, those challenges are beginning to give way and meat supplies are on the rise.
The ongoing highly pathogenic avian influenza virus (HPAI) is a major concern for the entire poultry industry in the U.S. The current outbreak is the largest the U.S. has seen, affecting approximately 46 million birds as of early June 2015.
The U.S. beef cow herd bottomed out in 2014 in its most recent inventory cycle, and is currently in the early stages of herd rebuilding. Feedyards are competing fiercely with each other to procure calves and feeder cattle from all possible sources to fill their pens. The three major sources are the domestic beef calf crop, domestic dairy calves, and imports from Canada and Mexico.
From 1990 to 2011, domestic chicken production doubled in volume, while the volume of U.S. chicken exports surged nearly 500 percent. As a result, the share of exports to total U.S. production has grown fourfold to 19 percent.
After ignoring market signals to reduce the size of the flocks for most of 2011, U.S. chicken companies have finally begun to heed those signals. U.S. chicken production is now on track to fall to its lowest level in 5 years by mid-2012.