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Monday, February 15, 2010

USDA Ag Projections to 2019

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Excerpt; U.S. Livestock

The livestock sector continues to make adjustments in the first several years of the projections in response to high grain and soybean meal prices in 2007 and 2008, followed by weak meat demand caused by the global economic recession. With producer returns squeezed, production incentives fell, leading to declines in total U.S. meat and poultry production through 2011. These production adjustments combine with strengthening meat exports to reduce domestic per capita consumption
through 2012. The result is lower production at higher prices, which improves net returns and provides economic incentives for moderate expansion in the sector later in the projection period.
Higher grain prices and reduced demand push cattle inventories down through the start of 2011 and result in U.S. beef production declines in 2009-12. Beef production then rises in the remainder of the projection period as returns improve and herds are rebuilt. The total cattle inventory drops below 92 million head before expanding to about 94.5 million at the
end of the projection period. Rising slaughter weights also contribute to the moderate expansion of beef production beyond 2012. Continued high feed costs are expected to result in stocker cattle remaining on pasture to heavier weights before entering feedlots.
• Pork production declines in 2009-11 in response to high feed prices and lower demand and then grows for the remainder of the projection period as higher hog prices improve returns.
However, high feed costs are expected to limit growth in producer returns.
• Poultry production fell in 2009 but is projected to rise the most among the meats over the next decade, as poultry is the most efficient feed-to-meat converter. Growth will remain below rates of the past decade.

USDA Long-term Projections, February 2010

Continuing near-term production reductions in the livestock sector, along with some recovery in meat and poultry exports, result in higher consumer prices and lower per capita consumption.
Annual consumption of red meats and poultry falls from over 221 pounds per capita in 2004-07 to less than 206 pounds in 2012. As production increases over the remainder of the projection period, per capita consumption of red meats and poultry resumes growth, but only rises to about 215 pounds by 2019.
• Per capita beef consumption declines through the first half of the projection period, before rising somewhat over the last half. The initial decline reflects a lagged response in beef production coupled with continuing expansion of exports. However, as beef production expands more rapidly in the second half of the decade, per capita consumption grows.
• Reductions in pork production combine with rising pork exports to push per capita pork consumption down in 2010-12. A gradual rebound in per capita pork consumption occurs over the remainder of the projection period as production gains strengthen.
• Due partly to higher feed conversion rates and a shorter production process, the poultry sector has adjusted faster than red meats to the combination of higher feed costs and reduced demand. As a result, poultry production is projected to resume growth in 2010.
As producer returns improve, production strengthens further. Per capita consumption rises through the end of the projection period and, in contrast to red meats, surpasses levels of the past decade.

USDA Long-term Projections, February 2010 81

After the price declines seen in the livestock sector in 2009, largely due to recession-related effects on meat demand, prices rise over the projection period. A moderate pace of expansion combined with improving domestic and export demand support prices in the projections.

Reduced demand resulting from the global recession lowered overall U.S. meat and poultry exports in 2009 by more than 7 percent. After 2009, exports are projected to rise as global economic growth resumes and the U.S. dollar depreciates. With this growth, exports account for a growing share of U.S. meat use, although the domestic market remains the dominant source of overall meat demand.
• Most U.S. beef exports, primarily reflecting demand for high-quality fed beef, typically go to Mexico, Canada, and Pacific Rim nations. A gradual recovery is assumed for U.S. beef exports to Japan and South Korea, export markets that were initially closed to the United States following the first U.S. case of bovine spongiform encephalopathy (BSE) in December 2003.
• U.S. imports of processing beef from Australia and New Zealand increase in the projection period. With more beef demand in East Asian markets being met by the United States, exports from Australia and New Zealand to those markets are reduced, resulting in more of their product going to the United States. Additionally, moderate beef cow inventories and beef cow slaughter in the United States raise import demand for processing beef.
• Although efficiency in U.S. pork production enhances the competitiveness of U.S. pork products in global trade, longer term gains in U.S. pork exports will be determined by costs of production and environmental regulations relative to competitors. Production costs tend to be lower in countries that are developing integrated pork industries, such as Brazil. However, Brazilian pork
producers’ ability to compete in some markets is limited because some countries do not recognize Brazil as free of foot-and-mouth disease (FMD). Thus, Pacific Rim nations and Mexico remain key markets for long-term growth of U.S. pork exports, while Brazil’s pork exports expand to markets such as Russia, Argentina, and Asian markets other than Japan and South Korea.

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