Chicken will be the top global protein in 2020 and likely beyond, thanks to the fallout of African swine fever (ASF).
Dr. Paul Aho, an economist and consultant with Poultry Perspective, said as a direct result of ASF, chicken is now, or will very soon be, the world’s number one protein. He spoke the state of the chicken market as part of the National Chicken Council’s 65th Annual Conference in Washington on October 30, 2019.
Paul Aho, Poultry Perspective | Benjamín Ruiz
Aho said pork was formerly the chief protein, but the decimation of the Chinese herd by ASF allowed chicken to leap into the top spot. Pork may stage a comeback as China restocks, but Aho thinks chicken has the right fundamentals to retain the top ranking into the future.
ASF
The defining issue in the global protein market is the outbreak of ASF in China and elsewhere in Asia. The disease is expected to devastate China’s swine industry and the ripple effects could eventually touch all of animal agriculture.
Nevertheless, the dire warnings related to ASF have yet to come true. Nothing seems to be happening just yet, he said, because China picked up its slaughter pace and is emptying its cold storage. He expects the other foot will drop in 2020.
The Chinese eat an average of 90 pounds of pork per capita, making it the most popular protein by far in the country. Pork production is expected to drop by about 20 million metric tons in China between 2018 and 2020 due to ASF. Aho said the country will likely import to fill the gap, but that deficit is impossible to fill.
That will lead to greater imports of beef and chicken to China, too. But, the U.S. industry should know the likelihood of China importing American product is low. If the nation was to open up, it could easily be a $600 million to $1 billion market for U.S. chicken. Nevertheless, China continues to ban chicken imports.
The real impact, Aho said, of ASF on the U.S. industry will be indirect as the disease impacts other protein markets.
Corn and soybeans
A sudden jump in grain prices is one of the chicken industry’s greatest fears. Aho said a poor harvest in the current crop year is driving prices upward now. Moving forward, China is the wildcard for the global grain market.
In 2019, North America’s corn farmers dealt with a wet spring and early winter weather that affected the crop to a degree. Aho said the ending stock will be down in the 2019 crop year. Not as much as in a drought year, he said, but still enough to send prices higher. Given a normal harvest, in 2020 stocks will bounce back and prices will normalize.
Soybean prices are harder to predict thanks to China, he said. However, it’s fairly certain the country will need less soybeans because its swine heard is greatly reduced.
From 2001 to 2016, China went from importing almost nothing to more than 100 million metric tons. Its imports of the commodity are already dropping due to the ASF outbreak. Aho said China does not need U.S. soybeans and it is unlikely it will they will open up to U.S. product soon. In the unlikely event that it did, that would send the price up considerably.
The ending stock of soybeans in the crop year that just ended was much larger than normal due the lack of a Chinese market. The annual harvest appeared to be lackluster at the time, too. He predicted the ending stock would be down by the end of the current crop year and will start to normalize – like corn – with a more normal harvest the following year.
Domestic consumption trends
In the U.S. per capita chicken consumption is now at 94 pounds. That’s in step with rising overall domestic meat consumption since the end of the so-called Great Recession.
Aho said meat consumption tends to rise along with the median income. When the recession slowed the economy, meat consumption dropped. Once median income stopped falling in 2013, the decline stopped and consumption began to rise to pre-2007 levels.
During the recession, he noted, consumers picked chicken over beef because it was a cheaper option. He anticipated beef demand would rise faster than chicken as median incomes rebounded, but that was not the case after 2014. This could indicates consumers’ tastes and preferences are changing when it comes to red meat and poultry.