April 4, 2019
There still is a lot of uncertainty regarding African swine fever in China and other countries and its effect on world meat markets. Recent developments in the pork sector may have an increasingly important influence on beef and cattle prices as we move through 2019.
Although other meat industry dynamics lessened in importance over time as consumer substitution among meats continued to decline, there is an increasing likelihood that the cattle sector will be affected by other meat market factors in the months to come.
Confidence is low regarding any information available about the extent of African swine fever or potential effects to world pork markets because of resulting meat shortages.
Sharp upward price movements in U.S. hog and pork markets in recent weeks enhanced the possibility that the developing situation in China could spill over into beef and poultry markets in a major way.
A recent report from the USDA Foreign Agricultural Service projects a decrease of nearly 6 billion pounds in China pork production for 2019. Projections also include growth in China pork imports of about 1 billion pounds relative to 2018, with beef imports 600 million pounds higher and chicken imports advancing by 240 million pounds.
While U.S. meat shipments would only satisfy a modest portion of the potential increased China meat demand, there would be enhanced opportunities for U.S. product in other markets as world prices rise and other major meat suppliers divert more product to China.
U.S. beef imports also could be reduced. Other market analysts have speculated that total market effects may be much higher than those listed above.
Although not nearly as dramatic as potential African swine fever effects, other market developments point to less meat movement through U.S. domestic markets this year, enhancing the price outlook for beef and cattle.
While meat availability per U.S. consumer still is on pace to increase this year, the upward movement is not nearly as large as previously expected. Since USDA first began issuing projections for 2019 as part of the monthly World Agricultural Supply and Demand Estimates in May 2018, production estimates for all three of the major meat categories declined, while net trade expectations increased.
This removed nearly 1.2 billion pounds from the quantity expected to pass through the domestic marketplace this year, a positive development for price expectations. Expect more of the same as we move through the next few months if the African swine fever effects in China continue to intensify.
Heavy supplies remain a concern for all U.S. meat sectors, although the situation has improved in recent months. While domestic meat availability per person will grow for the fifth consecutive year in 2019, the increase looks to be less than originally expected.
Continue to monitor opportunities to protect the profitability of your industry when market conditions allow.
Brown is a livestock economist with the University of Missouri. He grew up on a diversified farm in northwest Missouri.
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