NASHVILLE, Tenn. — The beef sector faces challenges from a growing U.S. herd, record meat supplies and labour shortages at packing plants just two years after enjoying strong profits from tight supplies of beef and competing meats.
Flat U.S. household incomes reduce the likelihood of Americans eating a lot more meat.
U.S. milk, poultry and pork production achieved record levels in 2016. Beef production is expected to hit records by 2018 or 2019.
“The U.S. had to absorb the largest one-year increase in protein supplies in our domestic market,” he said.
Per capita protein consumption of beef, pork and poultry was nearly 220 pounds.
“Every man, woman and children consumed nearly 10 lb. more of protein last year,” he said.
Beef is adding to the protein supply because the U.S. cattle herd has been in expansion mode for the last two years. Expansion was sparked by the good cattle prices of 2015, lower feed costs and generally good pasture conditions.
The U.S. Department of Agriculture’s January 2017 inventory report said the herd grew by two percent from the year before and is now at 93.6 million head.
Within that herd, the number of beef cows rose three percent to 31.2 million. They are producing more calves that will eventually produce more beef.
Those additional cattle are pressuring packers, which are struggling to hire enough workers. More plants included a Saturday shift to handle the larger numbers.
“We are concerned we may not have enough harvest capacity as we get into 2018 and 2019 based on the range of growth,” he said. “We didn’t expect it would become as big an issue in 2016 as it is.”
Total cattle slaughter was at 31.9 million head, up four percent from 2015. Of that, 25.5 million were from the fed cattle category.
Cattle are also heavier, which added more beef to a saturated market.
Retail beef prices have come down, but household incomes will grow by only one percent this year. Consumers have limits on what they can buy.
“Put yourself in the shoes of the wage earners,” Blach said.
“We are back at the same levels from an income standpoint where we were two decades ago.”
Higher interest rates are forecast.
“If the economy picks up, there will be interest rate hikes as we move through 2017,” he said.
The increases are forecast to be a quarter of a percent at a time.
Political uncertainty prevails.
The beef industry relies on exports to take its excess production. No one knows what is going to happen with trade agreements or market access now that U.S. President Donald Trump has pulled out of the Trans-Pacific Partnership trade deal. No one is sure about his intentions regarding renewed NAFTA negotiations.
Restrictions on immigration could also affect access to workers at meat facilities at a time when the labour crunch is keenly felt, said Blach.