ANALYSIS - While the US economic recovery is continuing, it is slowing. There has been increasing consumption and increasing residential investment, but with falling non-residential investment, the recovery could stall, writes editor-in-chief, Chris Harris.
Speaking at the American Meat Institute Expo and conference in Dallas, economist Eric Trachtenberg from McLarty Associates addressing the general session, ‘Charting the Course: Industry and Economic Outlook’ said that forecasts showed a potential growth in the US of between 1.9 and 2.1 per cent for the current year.
However, he added: "It looks like the trend is down again. The recovery seems to be petering out."
Mr Trachtenberg said that while growth had been the result of increasing consumption and with consumption growth seeing debt falling, now that growth is slowing and job creation is also faltering.
He said that while consumer spending had been stimulating the economy, now people were finding they were spending more than they were saving.
Unemployment is slowly going down but while investment is slowing at present, it has been supported by the housing market. However, this too is bottoming out.
Mr Trachtenberg warned that before the end of the year, Congress will have to raise the debt ceiling again.
He said there were concerns that there could be a financial shock of between three and 3.5 per cent of GDP looming for the US economy and this could stop growth altogether.
"This cannot be allowed to happen," said Mr Trachtenberg.
He warned that globally, both Spain and Britain are in recession and the Euro crisis is continuing, with Ireland and Spain facing the most serious problems because their economies are contracting so fast and they are unable to get their debt under control.
He said there were other threats in the Middle East with concerns over Iran and the threat to oil supplies.
However, the global GDP is expected to grow at 3.5 per cent based largely on the expansion in the developing markets of China, Brazil, India, Mexico and even sub-Saharan Africa.
However, he said that oil prices are expected to stay high and soy bean prices are expected to be rising driven particularly by demand in China.
There could be rises of $10-$12 per bushel for soy and $4-$5 for corn between this year and 2021.
Mr Trachtenberg said that the US beef market will show slow growth in exports where it sends about 12 per cent of the product produced, with Canada, Mexico, Japan, the EU, Russia, Taiwan, Viet Nam and Egypt continuing to be the main markets.
He said that there are concerns over the accessibility of the Russian and Taiwanese markets because of sanitary trade blocks.
Pork exports, which account for 28 per cent of production, will remain strong in the major markets of Japan, Russia, China and Australia. Pork prices in China will move according to the level of imports.
On the poultry market, the US has been finding a number of difficulties in access to the Russian market but in the future the sector is expected to see the highest competition from Brazil.
In all, Mr Trachenberg said that the economic outlook is going to see weakness in the advanced countries with continued growth in the emerging markets with much of the emphasis being placed on the prices of corn, soybean and oil.
While the USDA is confident about the US market for pork, beef and poultry up to 2030, there is also going to be a production shift in the US together with Africa, Brazil and Russia. As the markets develop, new technology is going to be at the "front and centre" of the progress, while there is also going to be a developing link between food production and security.
There will be moves to develop production of food domestically in the emerging markets as countries such as China, India and Mexico see a rise in a middle class. However, this development could be severely hindered by bottlenecks in transport and distribution logistics.
Production patterns are also going to be affected by climate change and a focus on the sustainability of production.
The international commodity markets are also going to be influenced by more and more non-trade concerns and Mr Trachtenberg questioned whether the current World Trade Organisation negotiations to find a solution to the Doha round of talks and a global agreement will finally be replaced by a network of free trade agreements.
If this is the case, the World Trade Organisation could find itself redundant.