Animal protein sector in the US is slowly exiting the COVID-19 crisis

Now, the biggest problem seems to be a steady climb in corn, soybean, and wheat prices reported in the fourth quarter of 2020.

The US meat industry is slowly getting over the coronavirus effects but for a full recovery is going to need much time as another problem emerges in this market. A steady climb in corn, soybean, and wheat prices reported in the fourth quarter of 2020 has eroded the margins for both poultry and hog farmers. However, beef seems to enjoy these market conditions, despite the challenging foodservice environment, according to the latest CoBank report.

Profit margins for chicken producers during Q4 were generally below break-even, but average industry margins ended the quarter in a far better position than where they started, due to a 2% pullback in supply. What makes this margin improvement noteworthy is it occurred amid rising feed costs, but a contraction in chicken supply helped prices for leg quarters, wings, and whole birds to climb through year-end.

The US pork sector worked through the backlog of hogs over the summer and started the fourth quarter relatively current in most parts of the country. That along with the boost in trade expectations following the discovery of African Swine Fever (ASF) in Germany delivered the best spot producer margins of the year in October. These margins eroded through the quarter though as fears of capacity issues and higher feed costs began to take their toll, as did margins for pork packers.

US beef demand performed well during the fourth quarter, despite the challenging foodservice environment. The beef cutout made a strong rally in November as many consumers switched to beef for their holiday meals in light of smaller gatherings. With limited available industry capacity and a challenging labor environment, beef packers continue to benefit from strong margins and producers and feeders are increasingly focused on the feed market.

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