Meat sector faces mixed outlook, USDA reports

By Ahmed ElAmin

- Last updated on GMT

Related tags: Beef, Cattle, Bovine spongiform encephalopathy, Us

By all accounts the US meat sector faces a mixed outlook, with
prices falling for domestic supplies of beef, the encroachment of
cheaper imports, a new case of mad cow disease in Canada and
worries about avian influenza.

The falling prices has been good for processors and is likely to be sustained in the beef sector, according to the latest forecast report by the US agriculture department.

Prices for beef and all classes of cattle, except cows, are declining in response to heavy supplies of all meats - beef, pork, and poultry - increasing grain prices, and record inventories of cattle on feed, the USDA stated.

The gap between domestic beef production and consumption is greater than ever, yet prices to cattle producers fail to reflect this fact, according to R-CALF USA, a producers' industry association.

The US cattle industry is now under-producing for the domestic market, falling short by three billion pounds - the beef equivalent of 3.9 million cattle, the organisation states.

While the loss of US export markets due to BSE partially explains the reduced production and falling prices, the organisation states, pointing also to the increased imports from cheaper producers overseas.

January imports of processed beef were 35 million pounds more than those in January 2005, and that January 2006 imports of live cattle were 115,000 head greater than in January 2005. To help its members compete the organisation wants legislators to implement proposed Country-of-Origin Labeling (COOL) so that consumers will know whether beef for sale has been produced domestically or has been imported.

With the discovery of a fifth case of bovine spongiform encephalopathy (BSE) in a dairy cow in Canada, producers fear they will continue to be cut out of the international marketplace, and worse, that the public will reduce their purchases. The dairy cow with BSE was born three years after Canada put in place a ban on using animal parts in feed.

Processors can take succor in a Kansas State University survey, which found that 77 percent of consumers said their consumption had not changed after the first case of BSE was discovered in the US in December 2003. Of those whose consumption had changed, the respondents reported they were consuming less ground beef, hot dogs and steaks.

As things turned out, the market data showed that for the first quarter of 2004, just after the discovery of the first U.S. BSE case, there was no weakening of domestic beef demand.

A second BSE case in the US was confirmed in June 2005. As in the first case, meat from the affected cow did not enter the food supply. And also as in the first case, domestic beef demand did not suffer.

If repeated multiple cases of BSE were found in the US, the survey suggests that there would be major trouble for the beef industry. Surveyors asked what consumers would do if 20 cases of BSE were discovered, but the responses varied according to how the question was framed.

In the poultry trade, US broiler exports are expected to grow by three per cent in 2006, to 5.3 billion pounds. First-quarter exports are expected to fall two per cent below the first-quarter 2005, largely on consumer concerns about avian influenza. Turkey exports are expected to grow by more than five per cent this year, with Mexico accounting for most of the increase.

US broiler production is expected to grow by about two per cent in 2006 to 36.2 billion pounds. Taking expected export increases into account, product available for consumption is expected to increase by almost two pounds, to 87.7 pounds per capita on a retail-weight basis.

After falling steeply in fourth quarter 2005 and into first-quarter 2006, broiler prices are expected to gradually strengthen as production growth slows and stocks are gradually reduced.

Turkey supplies are expected to be relatively tight in 2006, given expectations for little production growth and higher exports. However, prices for turkey parts will be under pressure by lower broiler meat prices.

In the first two months of 2006, one of the largest reductions in broiler meat exports occurred in the Commonwealth of Independent States members. Broiler meat shipments to the eastern European region dropped from 107 million pounds in January-February 2005 to 66 million pounds in the first two months of 2006, a 38 per cent decrease.

A large per cent of the decline is attributed to bird flu concerns within the region.

However shipments to Russia, the largest importer of US broiler meat, totaled 283 million pounds in January-February 2006, up 99 per cent from the same period in 2005.

In the pork market, hog inventories and farrowing intentions that were largely anticipated, and consistent with USDA's 2006 production forecasts.

Strong exports in January and February contributed to a revised annual 2006 pork export forecast of 2.9 billion pounds, an increase of about nine per cent over last year.

The 2006 U.S. commercial pork production is expected to be about 21.3 billion pounds, three per cent above 2005. An 11 per cent increase in live swine imports will contribute to the production increase, the USDA stated.

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