Rabobank: Largest Increase in US Meat Consumption Since '70s

30.08.2016

The US had a momentous year for animal protein in 2015 with the largest increase in US meat consumption since the food scares of the 1970s, according to a new report from Rabobank.

2015 was unusual not only due to the almost 5 per cent increase in per capita consumption, but also because the growth was reached without the help of beef, which had flat consumption.
Rabobank Report - Meat Consumption

Rabobank said it expects the following:

    US protein production growth of 2.5 per cent per annum through 2018, down from 3 per cent in 2015 - with beef being the largest contributor
    Trade will remain stabilized in 2016
    International markets are not expected to absorb new production growth
    US protein consumption will continue to increase amid lower meat prices
    By 2018, expect a more challenging profit environment across the US meat industry

Consumer Meat Prices Expected to Dip

With the protein supply in the midst of one of the largest increases in US history, Rabobank expects consumers to enjoy a noticeable amount of relief in the form of lower meat prices, especially beef and pork.

Meat prices have more than caught up with the increases in feed costs, and with more beef, pork and chicken supply on the horizon, the question is only to what degree prices will fall in the coming years. According to Rabobank, expect the following:

    US retail meat prices to decline by 14 per cent by 2018, from 2015 levels on a consumption-weighted basis, with beef prices being the major driver
    Beef prices to see the largest deflation at retail at 22 per cent
    Pork prices to decline 7 per cent
    Chicken prices to decline 5 per cent

Opportunities in Animal Protein

With US protein production growth looking to continue at a substantial rate of 2.5 per cent per annum, protein exports face numerous challenges and will struggle to keep up with this growth, suggesting an increase in domestic protein disappearance.

    Global meat trade is increasingly competitive
    Exchange rate volatility is a key factor in determining market advantages
    Uncertainty over additional growth opportunity for domestic animal protein after consumption increased in 2015 by 5 per cent
    Producer markets are expected to be positive in 2016 and possibly even in 2017
    By the end of 2018, profits are expected to slide lower

Despite the outlook for more challenging conditions, Rabobank foresees five paths to success for US animal protein companies, which are listed and detailed below. The turning of the cycle will bring with it a number of strategic pressures for further industry consolidation.


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