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Brett Stuart Global AgriTrends
Brett Stuart, cofounder of Global AgriTrends, speaks at the Egg Industry Center Egg Forum in Chicago on April 20. | Terrence O'Keefe
on April 29, 2016

Global population growth fueling meat and poultry trade

A market analyst shared his outlook on the world’s meat and grain trade and the trends that will shape years to come.

The world’s ever increasing population will be a positive force for the global meat market, according to a market analyst.

On April 20, Brett Stuart, a founding partner at Colorado-based Global AgriTrends, shared information on the state of the global economy during a presentation at the Egg Industry Center’s Egg Forum in Chicago. Stuart defined how current trends will shape the near future for meat and agrarian commodities.

The biggest trend shaping the future of the global economy, Stuart said, is the skyrocketing growth of the global middle class. By 2030, the size of the demographic is projected to rise to 4.9 billion from its current 2 billion. As most the world’s population growth is taking place in East Asia, a relatively small area of the world, that region will play an outsized role in global food demand in the future.

The outlook for poultry, meat and eggs

The performance of the world economy is significant to the meat industry because, Stuart said, income is correlated with meat consumption. Poultry, in particular, is consumed more often when incomes are higher. If the global economy is weak, there will be weakness in global demand for chicken.

One of the biggest trends in the world economy is the continued devaluation of crude oil. Stuart said the deflation is causing demand for chicken, particularly imported from the U.S., to drop in nations heavily dependent on oil exports. Weaker economies are creating weaker demand for U.S. leg quarters, which is leading to a glut of cheap dark meat in the U.S. This is coupled with concerns over highly pathogenic avian influenza and the strong dollar lead U.S. poultry exports to fall by about 600,000 metric tons between 2014 and 2015.

Globally the supply of poultry continues to rise versus the supply of pork and beef. Since 2000, the global per capita supply of poultry has increased by almost 50 pounds per person, while pork has grown by almost 20 pounds and beef has slipped by less than 5 pounds. Around the world, broiler production has increased since 2000, as well, with U.S. production now more than 18 million metric tons and Brazil and China not far behind at slightly less than 14 million metric tons.

Across the board, meat prices are lower than usual. Since 2000, global meat prices have increased steadily, but in 2014 beef, poultry and pork prices fell sharply. Pork prices are now at a 12 year low, poultry at a 7 year low and beef at a 2.5 percent low.

Egg exports are growing as well, Stuart said. The cumulative export market was worth $2.8 billion in 2015 with the U.S., with more than $600 million of egg exports, and the EU, with more than $900 million, leading the way globally.

In the global trade of poultry and eggs, highly pathogenic avian influenza continues to be the biggest factor. The disease is now global, with only South America apparently, not dealing with any active or resolved outbreaks. China, Russia and South Korea have banned all U.S. poultry imports while other countries maintain bans of imports from certain U.S. states. While U.S. outbreaks are all resolved and the U.S. government’s agencies showed effectiveness handling the disease during its most recent appearance in the state of Indiana, the disease remains a wildcard for U.S. exports and for the global market.

Globally, the poultry sector remains profitable due to abundant feed supplies and sufficient demand. The United Nations forecasts global poultry demand will only grow further and eventually outpace all other proteins. Profitability, however, leads all players in the market to expand their operations which could lead to an oversupply of poultry meat and harm profitability across the board, Stuart said.

China, Russia and Brazil

Three of the so-called BRICS nations’ agricultural trends are worth watching in 2016 and beyond, Stuart said.

Another major factor in the world meat picture is the Chinese appetite for pork. Stuart called it one of the most significant agricultural events in the history of the world. Half of the world’s pigs are raised in China, Stuart said, and prices in China are at record highs. The price of a pig is now more than double the price of a pig in the U.S. Retail pork prices are up 30 percent from last year, he said, and it’s infecting the nation’s food inflation index. While half of the world’s pigs are raised in China, they are the world’s largest pork importer with 2 million metric tons of pork landing in the country annually.

China is also attracting the world’s attention with a recent change in its grain policies. The nation has horded corn for years and now has 250 million metric tons stored, Stuart said, and its government is now realizing there is a massive oversupply of the cereal. Two months ago, the government announced it would cut the floor price for corn. The price fell to US$6.80 from $8 or $9 a bushel in short order, and will continue to fall. Because Chinese pork farmers are earning record profits and feed prices are falling rapidly. Stuart predicted this could lead to unprecedented growth of Chinese pork production and the nation could become a corn exporter as well.

Russia, faced with sanctions from the U.S. and other western nations due to its military actions in Eastern Europe, is in the midst of an agricultural experiment. The nation banned food imports from countries imposing sanctions on Russia and the government is attempting to make Russia self-sufficient in meat and poultry. Europe, Stuart said, is now swimming in pork and dairy products once consumed by Russia and Russian consumers are paying far more for food than they did previously. Producers in Russia are making far more and they are investing in increased production capacity. Stuart said this is concerning on a political level, too.

“Five years ago I would not have guessed that Russia could get food self-sufficient. They can because their prices are insulated and very high,” Stuart said. “I think (President Vladimir Putin) is saying, ‘I am now sanction-proof and I can redraw map boundaries in Eastern Europe.’”

Brazil, a huge agrarian nation locked in political turmoil and economic recession, is a major concern, Stuart said. While the South American country remains a major exporter of meat and grains, the nation’s economy shrank by 3.8 percent in 2015. Inflation, unemployment and interest rates are rising and austerity measures might be the only solution. The Brazilian Real is also plummeting in value compared with the U.S. dollar which is leading Brazilian companies to seek more customers abroad because they cannot find enough at home.

“Ag exports will continue from Brazil, but the domestic sector is in very tough shape,” Stuart said.

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