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Demand for meat, poultry remains strong as headwinds persist


At the 2022 Sosland Purchasing Seminar, Adam Stout, risk management consultant with Kansas City, Mo.-based StoneX Financial Inc., discussed the current challenges and prospects for the protein sector during a presentation on June 6. Stout’s overview, touching on beef, pork and poultry markets, noted three major themes across the markets: lower production despite high demand, the improved labor situation and the indirect impact of the Russia-Ukraine war.


Demand has been strong domestically as well as in the export markets, Stout noted.


“If you go back to the start of COVID and the pandemic, I don't know that you could describe demand as anything other than exceptional,” he said. “Demand has been great for all of the products.”


Unexpectedly, the US economy saw spikes in income levels due to the fiscal stimulus.


Despite extra currency in the market, a strain has been retail pricing. Stout pointed out that retail pricing in all protein categories is near record highs.


Stout also attributed higher costs as one of the many results of the ongoing Russia-Ukraine war.


“We don’t deal a lot in the protein markets in either Russia or Ukraine, but the indirect impact is significant — I mean, higher beef costs, higher turkey costs,” Stout said.


While the labor situation has recently been one of the biggest challenges facing all industries, including meat and poultry processing, Stout said it will likely be overshadowed by another pressing issue: widespread drought.


“Without the labor deal, where it really focuses our attention is on the biggest problems right now for cattle and beef and long-term projections in that market, which is going to be the drought,” he said.


With this trend, Stout expects supply issues to be one result, likely by the fourth quarter of 2022.


Although the summer grilling season tends to be a signal for high pork demand, purchases at foodservice and retail are lower than anticipated, which Stout hypothesized to be due to the impact of inflation on consumption.


Hog slaughter volume has also declined by about 5%, with reduced hog production numbers and limited expansion, while margins are the highest they have been for the past decade.


“The concern on the industry side is just the lack of expansion,” Stout remarked.


After the onset of African swine fever (ASF), which first began appearing in 2018, China has been working to compensate for the loss of hog production. Stout said, at this point, China is facing over-production.


“I think it came back far quicker than anyone in the industry would’ve estimated,” he said.


In the poultry segment, Stout attributes the highly pathogenic avian influenza (HPAI) outbreaks as the leading denominator. He estimated 35-37 million birds have been lost to date as a direct result of the disease.


“It didn’t come at a good time in the industry,” he said. “If you look back and look at where we’re at from a freezer-inventory standpoint, our turkey stocks were already running low, down basically all year. This has been the case dating back to COVID.”


Considering broilers account for 90% of poultry production, they have the biggest impact on the sector. While the loss of broilers is about half that of turkey, it is significant. Stout estimated that 800 million broilers are slaughtered a month compared to 20 million turkeys.


Par: Rachael Oatman (14/06/2022)

Source: meatpoultry.com

Image: rawpixel.com & canva.com


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