Bank forecasts better year for meat, poultry

by MEAT+POULTRY Staff
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DENVER – A return to balance is in the future of the beef, pork and poultry markets, CoBank said in a new research report. CoBank, a $110 billion cooperative bank, provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers.

CoBank research found leading indicators pointing to animal protein supplies transitioning toward a better balance, with protein stocks more in line with overall levels of demand. And while exports of meat and poultry will face headwinds in the first half of 2016, conditions are expected to improve over 2015 levels on improving price competitiveness of US meat products, according to Trevor Amen, animal protein economist with CoBank.

“It’s clear that in the coming year, the headwinds and adverse conditions created by excessive protein stocks are clearing,” Amen said. “Surprisingly strong US consumer demand helped lay the groundwork for improving market conditions in the coming year, combined with the fact that the net trade balance is expected to shift toward growing exports and fewer imports. This is welcome news for US beef, pork and poultry producers.”

CoBank is forecasting a significant slowdown of imports of lean beef while strong demand supports prices for beef, pork and poultry. Price outlooks for the year and beyond are mixed, CoBank noted in its report.

“Pork and chicken prices have upside potential compared to 2015’s fourth quarter lows, based on adjustments made for future production,” the report stated. “Beef prices will likely remain under pressure for the next two years, however, as the industry is coming off cyclical highs of 2014.”

“Total red meat and poultry production set an all-time high in 2015,” Amen explained. “Combined with fewer exports and more imports, total domestic meat supplies surged by 4.4 percent, the highest year-over-year increase in 40 years.”

CoBank noted that increase in supply translated to an additional 9 lbs. of protein per person —historically, protein supplies rose an average of 0.8 lbs. per person per year from 1960 to 2015.

“The increasing demand for a higher-quality diet likely provides domestic protein producers with significant opportunities in the next decade,” Amen concluded.
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