January 27, 2010
by Bernard Shire
In the view of Joel Brandenberger, president of the National Turkey Federation, economic forecasting exists only to make astrology look respectable. “That statement was actually made by John Kenneth Galbraith, the famous economist,” Brandenberger says with a laugh, after being asked what his turkey processing members see their businesses doing during this year.
But that doesn’t mean Brandenberger and his compatriots at the National Chicken Council, American Meat Institute, National Cattlemen’s Beef Association, National Meat Association and National Pork Producers Council won’t take a shot at predicting the future. In addition to some stargazing as to how their members will succeed economically in 2010, the meat and poultry trade associations are focusing on what the big legislative and regulatory issues will turn out to be for members this year. The consensus? Food safety will be the biggest concern, followed by a host of other issues.
“Nobody’s bullish, nobody’s saying ‘next year’s going to be great – I’d say ‘guarded optimism’ would be the best way to describe the poultry and meat industry’s outlook for this year,” says Jeremy Russell, government affairs and communications director for the National Meat Association.
NMA officials have seen many of its members beginning to target more retail customers with less emphasis on the foodservice segment. “People are eating at home more, even though top restaurants, those for special occasions, are still doing well,” he says. “But the family restaurants during 2009 haven’t been doing as well. Maybe that will change this year. But we see more of a holding pattern going on, with things staying about the same, rather than a decline.
“The real problem is there’s a great deal of uncertainty about what’s going to happen this year,” he adds. “The high rate of unemployment is causing a lot of problems. And the shift of markets for meat processors from foodservice restaurants to retail grocery stores may be leveling off. Poultry’s positives
The National Turkey Federation’s Brandenberger is also cautiously optimistic, pointing out the industry had the same production last year as in 2007. According to U.S. Dept. of Agriculture statistics, there was an eight percent decrease in turkey production from 2008 to 2009, with poundage down nine percent. However, some turkey processors actually enjoyed a better year in 2009, in part because the NTF lobbied Agriculture Secretary Tom Vilsack to make a bonus purchase of breast meat of about $60 million.
“One good sign is most of our members are reporting strong performances from Thanksgiving this past year,” he says.
Which brings us to 2010: “Our product inventory is not where I’d like it to be, but I feel better about turkey processing at the end of 2009 than at the beginning of 2009,” Brandenberger says.
A small degree of optimism can be found in the USDA predicting a production increase of 1.5 percent in 2010, says Richard Lobb, spokesman for the National Chicken Council. “Even if it happens, we’ll be back at 2007 levels, which is good. I think everyone is expecting a rebound this year,” Lobb says. On the down side, Lobb says the prediction of an increase “could go away” if the country moves deeper into a recession this year. He notes this past year was the first time since 1975 that actual production of ready-tocook broiler meat declined, at 3.5 percent. “This was quite a switch, usually there’s a 3 percent increase each year.”
“If our export markets are strong, there could be even more of an increase in product and sales,” he predicts, noting Russia recently announced export limits, “which could cut us back a little. But we don’t see any crisis in export markets right now.” He notes the Russians are suffering from food shortages, which would limit their ability to restrict poultry imports. Both the U.S. and Russia would both benefit from additional free trade in 2010.
As far as poultry markets go in the United States, Lobb says NCC members and customers need to innovate more. “The fast-food industry is always looking for new products, noting recent menu changes at KFC. While it is still the biggest seller of bonein chicken products, the restaurant chain is also moving into boneless products this year. “Chicken is still playing a strong role in quick-service restaurants,” he notes. “Only fine dining still remains a challenge for our industry.” Red-meat perspectives
Free and fair trade policies will be a top priority for the American Meat Institute and its member meat and poultry processors, according to Patrick Boyle, president and CEO. He says AMI will continue to fight unfair trade practices, barriers and protectionism , whether foreign or domestic, during the coming year. Expanding export markets is a critical factor on the path toward full economic recovery, he says.
Looking back at 2009, Boyle notes the contribution of the meat and poultry sector to the nation’s economy. “America’s meat and poultry packers and processors, wholesalers and retailers contributed $832.4 billion to the U.S. economy, 5.8 percent of the total Gross Domestic Product. The National Pork Producers
Council’s spokesman, Dave Warner, says the council’s members believe economic conditions are looking a little better for 2010. “An earlier analysis had pork producers losing money well into 2010. But now we’re seeing the possibility of our members earning profits beginning in April,” he says, based on the cost of producing a 200-lb. hog, which is now about $145. “If producers can sell in April at $72 or $73 per hundredweight, they will start to earn a small profit.” Some of the positive news is due to getting some pork off the market, because of the oversupply that’s existed.
Warner blames the H1N1 flu outbreak for some of the pork producers’ problems in 2009. “The H1N1 flu wiped out gains last summer we should have seen,” he says.
NPPC officials say producers could lose about $2.14 per head in early 2010, compared to losing $24 per head during the past two years. “There’s a feeling the economy is improving, reflected in the future prices coming back,” Warner says. Exports will also improve, he believes, with Russia lifting its import ban in July. “While 2009 exports were below 2008, they were higher than 2007. If you throw out the 2008 figures, 2009 would still be a record year. About $38 was added to the price producers received per hog,” he says. Back at the ranch
Yet, there’s no doubt producers are tied to the American economy, whichever direction it takes. Gary Voogt, president of the National Cattlemen’s Beef Association and owner of Voogt Farms, a cattle operation in Marne, Mich., near Grand Rapids, notes demand for beef has dropped 10 percent, thanks to the state of the American and world economy the past two years. “Here at home, one of every six people in Michigan doesn’t have a job; that doesn’t help us,” he says.
Voogt expects improvement in the cattle industry during the coming year, if the economy across the United States makes a comeback. “In this country, we eat 90 percent of the beef produced domestically, compared to 10 percent exported. So our future is really tied to what happens in the U.S.,” he says.
For his member cattle producers, Voogt notes the shift away from restaurant and foodservice business to retail and supermarket business. “The problem, looking at this year , is that trend makes it tougher to sell the best meat, because that meat usually does better in restaurants,” he says. Better markets for cattle producers are expected in the second half of 2010. “Our domestic market is helping the grocery stores, no doubt, but we’d like to see the restaurant business improve, where our best products can go.” •
Bernard Shire is M&P’s Washington correspondent, feature writer and a contributing editor based in Lancaster, Pa. With a background in editing and writing for daily news publications, he also works as a food safety consultant and writer for Shire & Associates.