JBS economist says economic slowdown ahead for meat sectors

JBS's Karl Skold shares global update on meat production
calendar icon 29 August 2022
clock icon 4 minute read

Speaking in late June at the Iowa State Swine Day, Karl Skold, PhD, agricultural economist with JBS, said the worldwide economic slowdown has lowered growth expectations for the meat production sectors. Relatively high inflation rates have hurt consumers throughout the world, both on the food and the energy side, he said.

Skold noted that consumers are being more selective in what they buy, trying to save money because of high gas and food prices. US consumers have been fairly resilient and continue to spend, but that may change, he said.

Liquidation of the US beef herd

“On the beef side, we've seen a liquidation of the US cow herd. And a lot of that's due to drought, last year in the northern plains, and still lingering drought in the southern plains up into the Midwest…that will likely reduce beef production into next year. And we've seen that anticipated by the futures market, and I think that will make less available proteins compete with pork in the next year,” Skold explained.

Slow growth for chicken

Chicken, on the other hand, he said, is in a slow growth pattern this year and looks forward to moderate growth into next year. Prices have been strong, particularly for dark meat, he said.

The war in Ukraine and loss of that chicken production has helped increase chicken prices worldwide. Ukraine accounted for more than 3% of the world's chicken trade before the war, he said.

“As consumers look for value, they've moved to chicken, both in the US and worldwide, that's helped out chicken prices as well,” and may indirectly help pork, Skold noted.

The highly pathogenic avian influenza (HPAI) outbreak in 2022 hurt the turkey and egg laying industries.

“We started the year with high turkey prices because we had lower production last year, but that's maintained high prices…that's going to be the case into next year. I know the USDA is expecting a recovery,” he said.

Pork holds its value

In the US, “we've been in an environment where we had high levels of income really boosted by government payments to people throughout 2020 and 2021, and we have some excess savings. We're in a declining environment in terms of real incomes. Not that we've seen that completely yet. But I think we're on that path. We've gone from exorbitant demand domestically to more, I'd say, normalized demand, and that feels bad,” Skold explained.

“But I think pork has held up fairly well…as we go into the following year, likely we'll see continued slower economic growth and perhaps not as robust a job situation, but pork still has been a value item at retail. Butts, loins, and ribs have held up fairly well,” Skold said.

Pork exports slow

African swine fever started in 2018 in China and has spread since then. It’s still spreading into Europe — that's been a long term move from east to west, he said. There’s been some recovery in production in many countries. In China, pig production and prices suggest they've gone back to the levels they were near before the pandemic, he added.

The recovery of the Chinese pig market has slowed US pork exports there, Skold said. The USDA pork export forecast is relatively flat for next year compared to this year.

“I think the question is really - what's going to happen on out,” he said. European Union pork production is expected to shrink, which may stabilize the US outlook for exports, even without as much demand from China, he added.

“We're in an environment we know we're going to have shrinking incomes here for a bit and shrinking demand globally because of those lower incomes. But I think still we're in a good situation, being a low-cost producer and having good supply chains,” he noted.

“I think the US hog industry has been resilient and has done a great job of providing protein for the world and also being a great source of protein for US consumers,” Skold concluded.

Click here to watch Dr. Skold's full presentation.

Save the Date: the 12th annual Iowa Swine Day is scheduled for Thursday, June 29, 2023 on the Iowa State University campus in Ames.

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