Record Meat Supplies Set to Decline Next Year

Domestic total meat supplies will set a new record during 2002.  This increase in supply has led to declines in wholesale beef, pork and chicken prices relative to a year ago. 

Wholesale beef prices have averaged about 8 percent lower through October.  Pork prices are down nearly 15 percent compared to 2001, while chicken part prices have held steady with year-ago levels in some cases but have declined dramatically in others. 

The biggest example of a decline would be the 30 percent drop in leg quarter values compared to last year.  In the case of chicken, the market disruption created by the trade dispute with Russia accounts for much of that value decline.  An overriding factor that has impacted all proteins is the sheer magnitude of increase in domestic meat supplies during 2002.

For the year in total, net meat (beef, pork and chicken) supplies (production + imports - exports) are expected to increase nearly 5 percent compared to 2001.  The largest increase is in chicken supplies (up 7 percent), followed by pork (up 4.3 percent) and beef (up 3.3 percent).  The total increase adds up to a whopping 3.5 billion pounds or nearly 70 million pounds per week. 

Slaughter totals have actually declined in the case of beef but carcass weight increases have more than made up for the decline in numbers.  Weight has also been an issue for most of the year for both the pork and poultry industries.  Recent production indicators indicate production slowdowns for beef, pork and poultry into early next year. 

What will happen next year and how will it impact beef and fed cattle values?  Current forecasts suggest that net meat supplies will decline 2 to 3 percent during 2003.  Smaller production totals for beef and pork account for most of the expected decline but a resumption of chicken export activity to Russia is significant as well.

Wholesale beef values will be supported throughout the year relative to 2002.  How much they are supported depends primarily on the magnitude of the decline in beef production.  It should be enough to support a fed-cattle annual average price around $71, up from $67 in 2001. 

Access to foreign markets, food safety concerns and increasing competion from Brazil are issues affecting U.S. beef exports, said Phil Seng, chief executive officer for U.S. Meat Export Federation. 

While trade agreements helped open doors in the last decade, keeping that access is a challenge.  As trade barriers have come down, others, such as anti-dumping laws, take their place.

While U.S. beef exports to Japan still lag behind last year, Seng said that they are about on track. He said food safety is an issue with consumers around the globe.

Seng noted that Brazil has doubled it export output for pork and beef combined.  China and Russia have been good markets for Brazil.