US protein sector poised for rebound in 2012
Experts predict that reduced production of beef, pork and chicken will allow prices for all meats to rise to profitable levels in 2012.
Total U.S. per capita consumption of red meat and poultry topped 223 pounds in 2006, but it has fallen precipitously since that time. Dr. Christopher A. Hurt, professor, agricultural economics, Purdue University, projects total per capita meat and poultry consumption in the U.S. will be at 199 pounds in 2012.
Hurt, who was one of three speakers at WATTAgNet.com’s Poultry Outlook 2012 webinar, said that since the start of the recession, U.S. per capita production of turkey, chicken, pork and beef have fallen 5%, 7%, 7%, and 17%, respectively.
U.S. cattle producers have been hurt not just by high grain prices but also by droughts in the southern plains and the southeast which have dried up pastures. Hurt said that cattle supplies could remain low until 2015.
Dr. Paul Aho, consultant, Poultry Perspective, said that the recession reduced demand for all meats and that the broiler industry was slow to recognize this fact. The U.S. broiler industry overshot demand in 2011 after it had reduced production at the end of 2008 because of high grain prices. Aho and Hurt predicted that the supplies of beef, pork, chicken and turkey have been reduced enough so that these industries should be profitable in 2012, even with $6 to 6.5 per bushel corn.
Aho said that the U.S. animal protein sector should benefit in 2012 from a slowly improving general economy and slight reductions in input costs.
In the USDA’s January grain stocks report, corn use was down 6.3% for the first quarter of the 2011-12 crop year (September through November of 2011), which was a little bit of a surprise, according to Tim Brusnahan, v.p. of consulting and principal, Richard A. Brock and Associates. In spite of the run up in corn prices of the last few years, demand for non-ethanol industrial uses of corn have remained firm, so Brusnahan said that this demonstrates that all of the supply rationing of corn has come from animal feeding operations.
Brusnahan said that large speculators have been long corn for 309 out 312 weeks since January 1, 2006. He said that large speculators remain long on corn and short on soybeans. In 2012, the corn price will be still relatively high from a historical perspective, but Brusnahan said that the corn price seems to have found an equilibrium level for one of the few times in the last six years. A reduction in volatility of the price of corn will be good for all users of corn. Since gasoline and oil prices are expected to remain at high levels in 2012, demand for corn for ethanol production will remain strong.
Brock forecast $5.75 to 6.50 per bushel farm price for corn in the 2011-12 crop year and $4.75 to 6.00 for the 2012-13 crop year. The USDA forecast released on January 12 was $5.70 to $6.70 per bushel for corn in the 2011-12 crop year. Brock forecast a farm price of $10.50 to 12.25 per bushel for soybeans for the 2011-12 crop year and $9.50 to 11.25 for 2012-13. The USDA has forecast a soybean price of $10.95 to 12.45 in the 2012-13 crop year. According to USDA estimates, the per bushel farm prices for corn and soybeans in the 2010-2011 crop year, which ended last August, were $5.18 and $11.30, respectively.