Consumer prices hits ahead

Consumer prices hits ahead

- Supply estimates suggest alarmingly higher meat and poultry prices. - Several factors could make price situation worse. - Russia rac

U.S. consumers could get another serious whack in the back of the head -- or, better stated, in the wallet -- next year as the meat and poultry supply looks to become even tighter and pricier, according to Feedstuffs sources.

This was reflected in the U.S. Department of Agriculture's supply and demand estimates last week, which came out with lower production for meat and poultry across the board next year and lower per capita supplies (Tables 1 and 2).

The production and supply situation is the consequence of ongoing problems producers are experiencing due to high corn and soybean costs brought on by the draw on corn for ethanol production, which was aggravated this year by drought-reduced crop production.

In response, producers are decreasing their herd and flock sizes to raise livestock and poultry prices sufficiently enough to cover higher costs of production, and prices will be higher next year for most of the production sector (Table 3).

In turn, consumer prices for beef, pork, chicken, turkey and other proteins will be higher next year than the near-record- to record-high prices of this year.

The situation particularly hits home when comparing 2013 production and supplies to those of 2008, the last time the production sector was operating at full potential before feed prices surged.

On this basis, the beef supply next year will be 12.4% less than it was in 2008, the pork supply will be 9.1% less, the chicken supply will be 5.2% less, the turkey supply will be 9.1% less and the total meat and poultry supply will be 8.7% smaller. The egg supply will be down 0.9%.

These decreases in U.S. supplies will occur by the end of next year while the U.S. population will grow approximately 5%.

That's quite a swing, sources agreed.

Then, there's the possibility that the supply and price situation could even get worse for consumers, led by the beef picture, as Dennis Smith at Archer Financials and other sources outlined last week.

Feeder futures increased for five straight sessions last week through Thursday and, in doing so, soared through resistance, an indication of the increasingly tighter feeder supply, which will mean sharply lower placements into feedlots next year.

This will be seen in the feedlot inventory report this week, which analysts said, in pre-report estimates last week, will show a Dec. 1 inventory that's 93-94% of year-ago levels. This will be due to six straight months of lower-than-year-ago placements and will mean "significantly" less fed cattle production in the first half of next year, according to Bob Price at North America Risk Management Services Inc.

This will force packers to pay higher prices for cattle than currently forecasted and, in turn, will increase beef prices to consumers more than currently forecasted, sources said.

Then, a number of countries, including China, Japan, Russia and South Africa, banned beef from Brazil last week following the announcement of a positive test for bovine spongiform encephalopathy (BSE) in a domestic cow two years ago.

The finding was an atypical form of BSE, so the World Organization for Animal Health has kept Brazil's BSE risk status as "insignificant," but nevertheless, other key importers of Brazil's beef are raising concerns.

If Brazil, the largest beef exporter in the world, loses markets, demand for U.S. beef likely will increase, which would further affect U.S. cattle and beef prices, sources said.

Furthermore, Japan, the largest importer of U.S. beef, is preparing to raise age restrictions on U.S. beef next year, which would further affect U.S. beef demand and cattle and beef prices, sources said.

All of this will result in higher chicken and pork prices than currently forecasted, and consumers will need to open their wallets wider and wider next year, sources said.

Supporting this, Ron Plain at the University of Missouri noted that the beef cow kill was down 12.7% this year through November and the heifer kill was down 5.4%, a clear indication that cow/calf producers are starting to rebuild their herds.

Moreover, he noted that the 2012 calf crop will be lower than year ago for the 17th straight year and that the 2013 calf crop will also be under year ago for the 18th straight year.

He said this will reinforce the exceptionally limited feeder cattle supply and, therefore, fed cattle production and the exceptionally strong fed cattle and beef prices.

Russia's ban. Russia, the sixth-largest export market for U.S. beef and pork, did announce last week that it will ban beef and pork imports that are not tested and certified to be ractopamine free.

However, observers suggested that the ban is political and protectionist in nature and probably will be resolved through negotiations.

At the same time, analysts noted that a number of U.S. pork producers already have ractopamine-free production systems in place for pork destined for China and said the ban should, therefore, have little to no effect on pork sales to Russia. They said the ban could have short-term consequences for the U.S. beef industry because the sector hasn't established a non-ractopamine system.

Calling the growing Russian market "not unimportant" for the U.S. beef and pork sectors, the ban is an issue that the U.S. needs to resolve soon, Steve Meyer and Len Steiner said in an edition of their "Daily Livestock Report" last week.

 

1. Dairy, meat and poultry production

 

 

 

Total

 

 

Total

Total

 

Eggs,

 

Beef

Pork

meat

Chicken

Turkey

poultry

meat/poultry

Milk

 

Year

-Billion lb.-

bil. doz.

2008

26.561

23.347

50.225

36.908

6.246

43.712

93.397

190.0

6.403

2011

26.195

22.758

49.232

37.201

5.791

43.513

92.745

196.2

6.590

2012

25.872

23.178

49.322

36.939

5.981

43.444

92.766

199.7

6.662

2013

24.585

22.775

47.627

36.445

5.790

42.750

90.377

199.7

6.585

2013 as % of 2012

95.0

98.3

96.6

98.7

96.8

98.4

97.4

100.0

98.8

2013 as % of 2008

92.6

97.6

94.8

98.7

92.7

97.8

96.8

105.1

102.8

Note: Eggs are table egg as reported by the U.S. Economic Research Service.

 

2. Meat and poultry per capita consumption (supply)

 

 

 

Total

 

 

Total

Total

 

 

Beef

Pork

meat

Chicken

Turkey

poultry

meat/poultry

Eggs,

Year

-Lb.-

number

2008

62.7

49.4

113.5

83.4

17.6

101.0

215.9

248.3

2011

57.3

45.7

104.3

82.9

16.1

100.4

204.6

247.6

2012

57.5

45.5

104.1

80.4

16.3

98.1

202.2

248.0

2013

54.9

44.5

100.7

79.1

16.0

96.4

197.1

246.1

Note: Meat and poultry consumption is on a retail weight basis.

 

3. Meat, poultry, milk and egg prices

 

Steers

Hogs

Chickens

Turkeys

Milk,

Eggs,

Year

-$/cwt.-

-Cents/lb.-

$/cwt.

$/doz.

2008

19.27

47.84

79.7

87.5

18.29

1.28

2011

114.73

66.11

79.0

102.0

20.14

1.15

2012

122.85

61.10

86.8

105.7

18.55

1.08

2013

129.00

65.00

91.0

105.0

19.55

1.17

Note: Steers are average of all grades. Hogs are liveweight basis. Prices for 2013 are at midpoint of ranges.

Source for Tables: USDA "World Agricultural Supply & Demand Estimates."

 

Volume:84 Issue:52

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish