,,,,;,,,,;Scarcity strategy described as 2012 outlook for meats, poultry
A "scarcity strategy" has taken root among producers of livestock and poultry for 2012, Feedstuffs magazine senior staff editor Rod Smith suggested in a mid-November Webinar presentation. He attributed this to a combination of high prices for grains, the effects of drought in some regions and narrow or non-existent profit margins in recent months.
What this means is that the total supply of meats and fish available to consumers in 2012 will be less than the total in the 1970s and that, not surprisingly, the retail prices for them will continue to rise, Smith pointed out. On a per capita basis, the differences would be even more evident, he noted.
Although the production of pork in 2012 is expected to top the 2011 one by 1.8 percent thanks to more pigs surviving per litter, the per capita availability in the United States will be 43.5 pounds - less than in the 1930s, Smith remarked. The expected availability of retail beef (not including the weight of bones) will average 51.9 pounds in 2012 or less than in the 1940s, he added.
For a more recent comparison, Smith indicated that total beef production in 2012 is forecast to be 6 percent less than in 2008 while turkey production will be down by about 10 percent. He said chicken production has been virtually at the same volume for the past 4 years and the economic outlook for 2012 doesn't look too promising.
Chicken growers "misread corn prices for 2011" and several major bankruptcies occurred as a result, Smith remarked. "But by mid-2011 the industry became believers and they cut back a lot on their hatchings. Now we have a balance of supply and demand."
The chicken industry was also providing far too much breast meat, Smith pointed out. He also noted that consumers in the United States are turning more toward dark meat while white meat is in greater demand in the export market.
Although the economics for turkey production are most positive than for chickens in 2012, this should not be taken as a signal to expand, Smith cautioned. "Turkey prices are high and I don't expect any blow-up in 2012."
"Egg producers have shown exceptional production restraint in recent years," Smith observed. He expects egg production to be down slightly again in 2012 because of the high cost of corn, the downturn in the foodservice sector and the overall slow recovery of the economy.
Per capita production of eggs has already been down in 6 of the past 7 years, Smith stated. He also cited "production disruptions" from the chicken housing legislation in a few states and mentioned the recent agreement, set to take full effect in 2029, between the United Egg Producers Association and the Humane Society of the United States on a "colony housing" plan, which he believes would combine the best elements of both cage and free range housing.
Noting that retail prices for meats, dairy products and eggs are likely to rise at between 3.5 and 5 percent in 2012, Smith asked "Will consumers pay?" He said that "all four of the engines" that drive the economy - spending by government, businesses and consumers and for housing - "are shut down."
Despite the weak overall state of the economy, demand for meats and poultry is up somewhat, Smith observed. Although pork production is expected to rise modestly in 2012, with exports accounting for 22 percent of the production and pork becoming a bit more popular on restaurant menus, he said "no analyst is recommending an expansion in pork production."
It is not the case for beef or poultry but hog slaughter plants are already handling virtually all their capacity of 2.335 million head per week, Smith reported. Retailers are caught in a different kind of pinch - how to price meats with their most recent practice being to increase their margins on poultry while tightening them for pork and beef, he noted.
But economic stress also exists for both the feeders of livestock and the packing plants, Smith stated. He noted that grain prices have recently been at a record high for an extended period, hay supplies and pasture are short because of drought on the Southern Plains and some other places and retailers don't like high input costs on what they're selling.
In the dairy market, Smith sees "a tug of war between bullish and bearish factors." The record-high average milk prices in 2011 are an enticement to expand production but the milk to feed cost ratio is still quite low, the income over feed costs is likely to be down even more in 2012 and significant milk production increases in Oceania (New Zealand and Australia) in the current season are likely to cut into the export opportunities on milk powders and other products by the United States in 2012, he explained.
Based on the latest corn and soybean production data for 2011 and the expected carryout on Aug. 31, 2012, Smith doesn't expect much of a cutback on prices for those commodities during the coming year. He noted 40 percent of the corn crop is used to make ethanol - a tripling of production since 2006 - but the federal Renewal Fuels Standard goal of producing 15 billion gallons of ethanol annually is close to being met.
Instead of focusing merely on 2012, Smith suggested "the real story is the 2013 outlook." By that, he meant the combination of such factors as the smallest beef cow herd in this country since the early 1950s, the possibility that corn might be grown on 7.5 million more acres in 2012 (most of them in North Dakota, South Dakota, Missouri and Arkansas) and the unpredictability of the economy and the duration and extent of the current drought in significant portions of both the major grain and livestock producing areas.
Because of the major cutback in the beef cow herd, no rebuilding of previous production volume is possible until 2014 at the earliest, Smith remarked. He noted dairy cow numbers have decreased during 4 of the past 5 years but milk production continues to increase because of more milk per cow.
Good rations and other management practices account for the increases in milk per cow but many dairy herd owners continue to face very tight operating margins and more sellouts are likely, particularly in the Northeast and Midwest, Smith predicted. He said the very high prices for cull cows, both dairy and beef, are encouraging owners to sell and, in the case of dairy, cover the cost of a springing heifer with the income that a culled cow commands to cover the market demand for lean beef that's turned into ground meat.
