Will US poultry supply outpace consumer demand in 2017?

U.S. meat protein supplies headed into 2017 are expanding in all sectors – beef, pork, chicken and turkey. As the chicken industry enters its fifth year of profitability, is the poultry supply finally on its way to outpacing demand?

Thornton 90x90 Headshot Headshot
Yurii Bukhanovskyi, Bigstock
Yurii Bukhanovskyi, Bigstock

U.S. meat protein supplies headed into 2017 are expanding in all sectors – beef, pork, chicken and turkey. As the chicken industry enters its fifth year of profitability, is the poultry supply finally on its way to outpacing demand?

Rabobank’s senior analyst for animal proteins, Will Sawyer, said that the U.S. consumer’s appetite for meat and poultry is going to be tested over the next two years as production expands in all animal proteins sectors at the same time – a relatively rare occurrence.

“We are looking today at one of the largest increases in U.S. meat production in a long time. U.S. meat production began to rise in 2015 and this trend is going to continue,” he said to the USA Poultry & Egg Export Council (USAPEEC).

Rabobank is predicting there will be about a 2.5 percent increase in total meat production this year as the meat and poultry industries are all earning high margins.

“Every sector of animal meat protein production in the United States is now expanding capacity and doing their best to expand their customer base,” he said.

US-meat-production-on-rise

Beef production will grow the fastest between now and 2018.
Beef production will grow the fastest between now and 2018.
 
Beef production will grow the fastest between now and 2018.
 

Largest per capita consumption increase in 2015

The largest increase in per capita meat consumption in the U.S. in 40 years occurred in 2015, Sawyer noted. Meat consumption rose by 5 percent, and the upward trend in meat production is going to continue, he predicted.

“Looking as far back as 2007 and through 2014, total volume of meat production in the U.S. was stagnant. That was because of the recession and high feed costs, but 2015 changed that equation,” he explained.

 “Luckily, consumer demand for meat is strong, but the domestic market for meat and poultry is going to be pressured by the increases in supplies,” he said.

US-per-capita-protein-consumption

The largest increase in per capita meat consumption in the U.S. in 40 years occurred in 2015.

Pickup in exports needed to support profitability

“Beef, pork and chicken producers need to find markets outside the U.S. for this story to play out well,” Sawyer said.

Retail beef prices could fall by 15 percent to 20 percent in the next two to three years, while pork and chicken prices could fall by 10 percent to 15 percent.

Beef-pork-and-chicken-prices-2005-2018

Beef prices are forecast to drop by $1.36 a pound by 2018 from their 2015 high.

“The profitability of North American chicken producers has been on a pretty darn good run,” he said. “This year will be the fifth consecutive year of positive margins for North American chicken producers.”

That profitability is being driven today as much by higher export prices for leg quarters as by prices for chicken on the domestic market.

“This time last year, U.S. chicken producers were making their money on the domestic market, but with leg quarter prices having tripled [exports are now also contributing to the industry’s profitability]. That has come at a very good time as the domestic market has some challenges.”

EBIT-margins-chicken-companies

North American chicken producers continue to outperform their counterparts in Europe and South America.

Peak levels of protein production by 2018

As production of meat proteins rise to the previous high levels within the next two to three years, trade will play a key role in the poultry industry’s profitability.

“When you consider that it took the meat and poultry industries a decade [since the recession of 2007-08] to rationalize supplies and get prices to the profitable levels of today, the expected increases in supplies will be rapid over a relatively short time period. We’re going to see the U.S. consumer’s appetite for meat tested,” Sawyer concluded.

Page 1 of 1576
Next Page