DENVER – US Reliance on export demand for meat and poultry products has perhaps never been greater than it will be in 2019, according to a new report from CoBank Knowledge Exchange titled, “Protein Passport: Export Market Volatility is Worth the Risk.” Projections for 2019 indicate animal protein production to continue rising and consumption in the US will exceed a record that was established in 2006. The sustained domestic production growth has created pricing pressures that are forcing producers to look to export opportunities to ensure their bottom lines are not negatively impacted.
“Export growth will be key for US beef, pork and chicken producers as growing meat supplies and processing capacity outstrip domestic demand,” according to the report. What has been a five-year surge in demand for animal protein will likely subside, according to Will Sawyer, CoBank’s lead economist of animal protein. These conditions make it advantageous for companies in the meat and poultry industry to become laser-focused on opportunities in export markets.
“With the cow herd at multi-year highs and pork and poultry processors expanding capacity, exports will likely underpin further industry expansion for the US in the years ahead,” Sawyer said.
Producers’ reluctance to shift more focus to exporting products due to concerns about assuming excessive risks and exposure to market volatility should realize the experience of other countries.
According to the report, “Greater reliance on export markets has resulted in higher prices for the animal protein sectors in other exporting nations, including Australia, Brazil and Canada. However, analysis shows that greater profitability has offset that price volatility for beef, pork and poultry producers in each of those countries, despite declining domestic consumption in both Australia and Canada.”
Compared to 20 years ago, US shipments of meat and poultry are substantially higher. They need to increase even more to ensure continued production expansion. CoBank states that the US exported 12 percent of its beef production; 16 percent of its chicken production and 23 percent of its pork production in 2018. Based on the experience of other exporting countries, volatility and risks associated with global trade has been offset by profitability in most cases.
“Profitable growth has always been at the core of the industry and has enabled producers and processors to recover from the historic volatility and costs from 2007 through 2012,” said Sawyer. “The groundwork has already been laid from the supply chain to industry representation to let trade drive the industry forward over the next decade,” he said. “Long-term, exports will be the key driver for further expansion across the animal protein sector.”