US meat industry demonstrates strong growth in the first quarter
Despite the COVID-19 crisis, 2021 will be a positive year for the US meat industry, according to CoBank's quarterly report. The US economy continues to exceed expectations as stimulus funds fuel high consumer spending. Consensus forecasts point to 7% GDP growth in 2021, the fastest growth rate since 1984. However, inflation is inevitable as price cuts in 2020 will push inflation up year-on-year over the next two quarters and new upward price pressures should come and push headline inflation above 3%.
The transition to a world less limited by COVID has begun. But there will be no return to pre-COVID-19 conditions for the economy and rural industry. A changed political environment and awakened commodity markets are giving way to an entirely new operating environment, according to a new quarterly report from CoBank's Knowledge Exchange.
So far, in the first three months of the year, the animal protein market has shown good results. Chicken prices in the US kicked off 2021 high, rising more than 20% in the first quarter. These prices offset double-digit feed price inflation and pushed spot margins into positive territory. Counting the number of eggs laid and the placement of chicks is the main indicator that chicken production will remain at current levels, so chicken prices will continue to remain high throughout the summer. The expected increase in vacations and business travel this summer will lead to increased foodservice sales, which will benefit the poultry sector.
US beef demand was incredibly strong in the first quarter, despite the challenges in the food service industry. Strong demand and expectations of limited supply growth in the second half of 2021 led to an increase in cattle futures. The USDA expects beef production to decline 3.5% in the second half of 2021, which helped push cattle prices up nearly 15% from last year's levels.
Strong pork demand in the first quarter, coupled with signs of limited supply growth, lifted the profitability of the pig sector to levels not seen in years. Concerns about feed inflation and other costs have given way to optimism about another year of strong pork exports and strong domestic demand as US consumer behavior gradually returns to normal. China has slowed the recovery in pigs due to an increase in ASF infections this winter, helping to maintain a positive outlook for the rest of the year.