UTRECHT, NETHERLANDS – In its latest report, “North American Agribusiness Review,” Rabobank’s RaboResearch laid out the possible market instability in the fourth quarter of 2020 for the US meat industry as COVID-19 cases rise again during the winter months.
The analysis stated that the American recovery pace is already slowing as households and businesses are struggling with the impact of the virus.
Rabobank also pointed out that a highly contested 2020 US election, the ongoing tensions with China, and the lack of stimulus money will all be factors for the industry moving forward.
“Although some headwinds may turn out less severe than others, US recovery is in for a serious test in Q4, which could cause a temporary setback,” RaboResearch said. “The headwinds are likely to cause considerable market turbulence in Q4.
Beef numbers are showing some recovery, with cattle slaughter running at or slightly above levels from 2019. However, Rabobank is finding that fed cattle carcass weights are still 20+ lbs above last year. The numbers indicate beef production remains down 1% from 2019 with total beef production to close roughly 0.5% above last year.
Rabobank showed that pork production is on the uptick again, with harvest levels back to 95%, compared to 2019. According to the report, slaughters topped 2.7 million hogs during mid-October for the first time since March. However, the group warns of more fluctuation in this market similar to the spring.
“Markets continue to contradict USDA inventory reports, which projected a sizeable overhang in market-ready pig supplies in the coming weeks,” Rabobank said. “While weights have moved higher on cooler weather and new crop corn, we have seen little evidence of burdensome hog supplies with packer capacity in coming weeks.”
The group did point out that any plant disruptions could drive a sharp correction in market prices.
Another positive for the pork market is carcass values are up 46% from the lows in June and up 17% in the past month on continued export demand.
According to August export numbers (Mexico down 9%, South Korea 34%), US exports remain down in some countries, but the demand has grown again in China, which is up 21% and Japan up 9%.
Rabobank said the recent ban of pork imports from Germany following its African swine fever outbreak has led to more demand from the United States.
Finally, the review explained that the poultry sector shows limited growth for the year, while bird weight remains up 1% to 1.5% from the previous year.
RaboResearch said chicken prices remain depressed as excess protein supplies continue to look at global and domestic markets.
The report said: “High retail prices of many chicken products continue to limit consumer interest, with scarce retail ad support, large suppliers of competing proteins, and growing supplies of chicken, we see limited improvement in prices in the near term.”
Another element for all meat prices and production is still an uncertain holiday season coming up as COVID-19 cases continue to surge around the United States.
“With fewer in-person conference and holiday parties, business demand will be weak,” the report said. “Furthermore, the outdoor patio dining that supported dine-in restaurants throughout the summer will be much less appealing in colder weather.”