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Meat Production, Supply, And Export Impact
DR. ANDREW P. GRIFFITH
KNOXVILLE, TENN.
U.S. beef, pork, and poultry markets are being pressured by increases in domestic meat production as well as international meat supplies. The increases in supply will negatively influence prices along the entire supply chain unless some factor positively influences demand. Lower prices at the farm and processor level would likely result in moderate price declines at the consumer level which is good for the consumer, but the farmer will take the brunt of the blow when prices decline.
In 2017, U.S. beef production exceeded 26.2 billion pounds which was the highest domestic production level since 2011. Similarly, total beef supply (Total production + Beginning stocks + Imports) in the U.S. in 2017 was 30.0 billion pounds marking the highest total supply since 2007 resulting in the fifth largest beef supply on record. Though 2017 beef production was strong, 2018 production and supply are expected to exceed 2017 levels. Based on World Agricultural Supply and Demand Estimates (WASDE) supplied by USDA, total beef production is expected to exceed 27.7 billion pounds while supply is expected to surpass 31.4 billion pounds in 2018.
Beef production and supply are impressive, but pork production and supply may be more impressive. Pork production in 2017 totaled 25.6 billion pounds while total supply exceeded 27.2 billion pounds, both record levels. Similar to beef, the WASDE report is projecting further increases in pork production and supply in 2018. Pork production estimates for 2018 total 26.9 billion pounds while supply is estimated at 28.5 billion pounds.
Poultry (chicken and turkey) production and supply have followed suit with beef and pork with increasing levels. Poultry production totaled 47.7 billion pounds in 2017 while total supply was nearly 48.9 billion pounds resulting in record production and supply. WASDE estimates for poultry production and supply in 2018 are 48.7 and 50.0 billion pounds respectively.
If these large numbers do not put the magnitude of production and supply in perspective maybe per capita consumption levels can do it. With the increases in total supply, domestic consumers will have to eat 58.1 pounds of beef in 2018 on a retail basis. This is an increase of 1.2 pounds from 2017. Similarly, consumers will have to eat 51.2 pounds of pork (+1.1 pounds from 2017) and 109.0 pounds of poultry (+0.7 pounds from 2017). The increases in per capita consumption may seem modest but increasing red meat consumption two percent could be difficult.
One factor yet to be discussed here is the export market. Exports are an integral part of the beef, pork, and poultry sectors, but they impact each industry to different degrees. Beef exports in 2017 accounted for 9.5 percent (2.86 billion pounds) of beef supply while pork exports accounted for 20.7 percent (5.63 billion pounds) of pork supply. Similarly, poultry exports accounted for 15.4 percent (7.53 billion pounds) of poultry supply. These values demonstrate the pork and poultry industries are more dependent on the export market than the beef industry. Not only does the quantity of each product exported matter, but the destination of those products is key. The major beef export markets are Japan, South Korea, Hong Kong, Mexico, and Canada. Similarly, the primary pork export markets are Mexico, Japan, South Korea, China, and Canada. Poultry exports are much more diversified but still rely heavily on NAFTA trade partners.
Moving forward, producer profitability across all meat industries is likely to decline unless there is a surge in demand from the domestic market, the export market, or both. There are concerns with both of these markets as the domestic market means higher per capita consumption must be achieved, and portions of the export markets are being influenced by trade negotiations while others are being impacted by tariff threats. Increased production and supply will likely persist into 2019. ∆
DR. ANDREW P. GRIFFITH: Assistant Professor, Department of Agricultural and Resource Economics, University of Tennessee
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