Economist Sees Another Declining Year of Supply

US - The health of the livestock industry is linked to the health of the broader economy, and producers of beef, hogs and chicken will have to wait for the global recession to end before they can expect any significant price improvement.
calendar icon 13 January 2009
clock icon 2 minute read

Chris Hurt, a Purdue University professor and Extension economist, said livestock producers were hit with the “double whammy” of a recession and high feed costs in 2008. In 2009, lower feed costs will benefit livestock producers, but the recession will continue to hurt demand.

“We’re going to see another year of struggle for the livestock industry,” Mr Hurt told a seminar on the livestock market outlook at the American Farm Bureau Federation’s 90th annual meeting.

For the past two years, meat production has declined in the United States due to higher feed costs. And because of the recession, Mr Hurt expects another year of decline in 2009. The recession will hit beef cattle producers harder than poultry or hog producers.

In relation to pork prices, since 2000 beef prices have risen 1.5 times higher than pork prices, Mr Hurt said. For beef, the more expensive, high-end cuts are showing the greatest decline in demand, with consumers substituting lower end cuts, poultry and pork. This is the case at both restaurants and grocery stores.

For the pork industry, Mr Hurt expects a slight profit or a break-even year in 2009. Supplies will need to be kept down for the pork industry to make a profit this year.

For the beef cattle industry to make a profit, supplies will also need to decline. “There should be no move to expand the beef cattle herd. I see another declining year of supply," he said.

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