** US To Produce Record Red Meat And Poultry In 2018: The February WASDE report did not make any major changes to the red and poultry estimates, with combined production fractionally lower from January. However combined meat production is forecast to increase 4% year over year, and if realized, total US meat production will be the largest on record. The largest increase for 2018 is in beef production, which is projected to increase 1,552 Mil Lbs (6%) – and record large at 27.8 Bil Lbs. Expansion in pork production is a close second, with annual output expected rise by 1,304 Mil Lbs (5%). US broiler production is also forecast to reach a new record level of 42 Bil, up 2% and the 6th consecutive year of record broiler production. The only species that looks to decline is turkey, but by less than 1%.
** The US Will Export More Meat As Supplies Increase: With larger meat production forecasts, the USDA expects that total meat exports will also expand in the year ahead. The greatest change in exports is expected in shipments of broiler meat, where the USDA estimates a 170 Mil Lb (3%) increase in exports. The US beef export forecast was up 1% from January and 6% over last year, with US beef exports expected to reach a record large 3,025 Mil Lbs. US pork exports are forecast to increase 268 Mil Lbs (5%) over a year ago, and will also reach a new all time record of 5,900 Mil Lbs. All combined, the USDA estimates that US exporters will ship more than 16.5 billion pounds of red meat and poultry this year. Its’ a big number, but we note that the increase in exports is simply a reflection of the larger supply. The USDA export forecast amounts to 16% of total US meat production, which is inline with the last 3 years.
** US Per Capita Meat Supplies To Be Record Large: While exports are forecast to expand in the year ahead, they will not offset the massive increase in production. Domestic per capita red meat and poultry disappearance (supply) is forecast to increase for the 4th consecutive year, with the February forecast up 6 Lbs from a year ago at 220 pounds per capita. US consumers will again benefit greatly from larger supply, which often comes at a cost to the US livestock/poultry producer.
Simple economic theory says that significantly increasing the supply of a commodity should have a negative effect on price. Of course what is unknown is the intensity of US demand, which has been quite strong in the previous 2 quarters. There is hope within the meat industry that the growing US economy will continue to support meat demand, along with US live animal prices and margins up and down the chain. Our view is that relative to production forecast CME hog and cattle prices for the summer are already quite rich, and we favor sales on any strong spring rallies.
