UTRECHT, NETHERLANDS – In its first “North American Agribusiness Review” of 2021, Rabobank’s RaboResearch laid out the meat industry’s initial insights and projections for the US economic recovery this year.
RaboResearch expects the US economy to grow by 4.5% in 2021 after an additional COVID-19 relief package is signed into law this spring.
“The question is how many of Biden’s plans are going to be realized,” Rabobank said. “After all the Democratic majority in the Senate is minimal. In case of gridlock, we would have to revise our forecasts downward again. Meanwhile, the Fed is likely to keep monetary policy unchanged as long as fiscal policy is sufficient to sustain the recovery.”
When it comes to the beef and cattle market, the review stated that a large supply of Q3 2020 placements hit the market during 2021. Rabobank expects the trend to continue for large fed supplies through Q1 and Q2. Cattle slaughter have consistently been above 2% to 3% year-over-year marks. The analysis is still showing fed cattle carcass weights are 20 to 25+ lbs above 2020.
For pork production, Rabobank expects to see a decline in the next few weeks following a USDA inventory report that showed a 3% drop in breeding and lower farrowing intentions.
“Slaughter is modestly below year-ago at present, while average weight remains slightly above prior year,” Rabobank said. “Despite adequate availability, hog prices have moved higher in recent weeks, anticipating tighter supplies.”
Pork carcass values are also increasing in 2021, up 13% year over year, as demand from the retail and early foodservice recovery boosts meat values.
The report concluded that lower overall stock of pork will keep markets volatile in the coming weeks.
“Higher prices could begin to curb demand, but with stimulus money flowing to consumers we expect a relatively stout market in the intermediate term,” Rabobank said. “Based on current demand, packers should continue to see healthy margins in the coming months.”
Another positive for the pork market is US exports increased 15% in 2020. According to Q4 numbers of key markets like Mexico (up 15% year-over-year) and Japan (up 11%) continued to recover while growth slowed in China by the end of 2020 (up 4%).
“China will remain an important market, but we expect shipments to slow as the country continues to rebuild its local hog supplies,” Rabobank said. “Other smaller markets that rely heavily on tourism and/or oil revenues may rebound more slowly.”