Economist looks closer at lower meat prices
Sept. 9, 2016
by Meat+Poultry Staff
COLUMBIA, Mo. – The reason and prospects for sustained lower prices for meat products in the US comes down to a basic economic premise: supply and demand. During a Sept. 8 presentation at the Agribusiness Policy Symposium, Scott Brown, a livestock economist and extension specialist at the Univ. of Missouri, told attendees that as long as meat production remains at record highs, prices will decrease. Weather, export demand and the strength of the US dollar are also significant factors but domestic production is a big factor.
“We added 3 billion lbs. of meat in 2015, and continued that at a rate never seen before,” Brown said. “The growth is not over,” he added.
Livestock producers historically respond slower to declining prices and the current conditions are no exception. Brown pointed out that an additional 3 billion lbs. of meat could potentially compound the issue as breeding herd sizes for sows and beef cattle are still trending up.
When supply outpaces demand, “We eat it, export it or cut the price to sell it,” Brown said.
With pork production continuing to grow and new pork-processing plants under construction and coming on line in the coming year, processing the animals shouldn’t be a challenge.
Brown points out: “We can take care of the pigs. But what are we going to do with all of that pork?”
Historically, producers respond and predict what factors are likely to impact demand and price or respond as quickly as possible when it becomes apparent. Biology plays a role in how nimble producers can be. Chicken producers can grow their flocks quickly and pork producers are next in line to be able to respond by growing herds, while cattle producers lag behind because of a longer gestation period.
Even now, however, “What producers fail to remember is that the new low beef prices are better than calf prices were for a long time,” Brown said. “Cow-calf returns are still at the eighth highest year since 1990.”