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Production adjustments in response to high grain and soybean meal prices in 2007 and 2008 continue to ripple through the livestock sector in the first several years of the projections. Additionally, demand is somewhat weakened due to the domestic recession and global economic slowdown. Thus, with producer returns squeezed in 2008 and rebounding only slightly over the next few years, total U.S. meat and poultry production declines through 2011. These production adjustments combine with strengthening meat exports to reduce domestic per capita consumption through 2012. The result is lower production at higher prices, with improving net returns providing economic incentives for moderate expansion in the sector toward the end of the projection period.
Production of all meats declines in 2009 and 2010 in response to higher feed costs.
- Higher grain prices as well as effects of drought on pasture conditions in recent years hold down cattle inventories, pushing U.S. beef production down in 2009-12. Production then rises in the remainder of the projection period as returns improve and herds are rebuilt. The total cattle inventory drops below 94 million head before expanding to about 97 million at the end of the projection period. Rising slaughter weights also contribute to the moderate expansion of beef production beyond 2012. Continued high feed costs will result in stocker cattle remaining on pasture to heavier weights before entering feedlots.
- Pork production declines in 2009-11 in response to high feed prices and then grows for the remainder of the projections as higher hog prices improve returns. Production coordination and market integration between the United States and Canada continue in the hog sector. Canada is the major supplier of live swine imported by the United States.
- Poultry production declines in 2009-10 while adjusting to high feed costs, but then rises the most among the meats through the rest of the projection period, reflecting poultry being the most efficient feed converter.
Livestock sector production adjustments to higher feed costs, as well as gains in meat and poultry exports, result in higher consumer prices and lower per capita consumption. Annual per capita consumption of red meats and poultry falls from 221 pounds in 2007 to less than 210 pounds in 2011 and 2012. Following the sector's production adjustments to lower levels, per capita consumption of red meats and poultry then resumes growth, to 217 pounds in 2018.
- Per capita beef consumption declines through the first half of the projection period, reflecting production adjustments in the industry to higher feed costs, before rebounding somewhat over the last several years of the projections. U.S. beef exports rise through the projection period, further limiting domestic per capita beef consumption. A gradual rebuilding of U.S. beef exports to Japan and South Korea is assumed. Demand for U.S. beef in export markets is primarily for high-quality beef.
- Higher feed costs lead to reductions in pork production, which combine with rising pork exports to push per capita pork consumption down through 2012. A gradual rebound in per capita pork consumption occurs over the remainder of the projection period as production gains strengthen.
- Due partly to higher feed conversion rates, poultry meat prices remain lower than red meat prices. Nonetheless, as returns are squeezed, lower production raises prices and results in per capita consumption declines in 2009-11. Following these adjustments, producer returns improve, production strengthens, and prices moderate. Consequently, per capita consumption grows slowly through the end of the projection period.
Increasing livestock prices over the first half of the projection period result from lower production as the sector adjusts to higher feed costs. Once the production adjustments have occurred, prices level off at a new higher plane.
Even with higher meat prices and near term recession in the United States, rising U.S. incomes over most of the next decade facilitate gains in consumer spending on meat. Continuing a long term trend, overall meat expenditures represent a declining proportion of disposable income.
Although the domestic market remains the dominant source of total meat demand, exports account for a growing share of U.S. meat use. The near-term economic slowdown and higher meat prices reduce overall U.S. meat and poultry exports in 2009 and 2010. Exports rise through the rest of the projection period as global economic growth resumes and the U.S. dollar remains relatively weak.
- U.S. beef exports primarily reflect demand for high-quality fed beef, with most U.S. beef exports typically going to Mexico, Canada, and markets in Pacific Rim nations. A gradual recovery in U.S. beef exports to Japan and South Korea is assumed, export markets that were lost following the first U.S. case of bovine spongiform encephalopathy (BSE) in December 2003.
- U.S. imports of processing beef from Australia and New Zealand increase in the projection period. With more beef demand in East Asian markets being met by the United States, exports from Australia and New Zealand to those markets are reduced, resulting in more of their product redirected to the United States.
- Pacific Rim nations and Mexico remain key markets for long-term growth of U.S. pork exports. Brazil is also a major pork exporter. However, no changes in the set of countries recognizing Brazil as free of foot and-mouth disease (FMD) are assumed, thus limiting Brazilian pork producers' ability to compete in some markets. Consequently, Brazil's pork exports expand to markets such as Russia, Argentina, and Asian markets other than Japan and South Korea.
- Despite higher feed costs, increased efficiency in U.S. pork production enhances the competitiveness of U.S. pork products. Nonetheless, longer term gains in U.S. pork exports will be determined by costs of production and environmental regulations relative to competitors. Production costs tend to be lower in countries that are developing integrated pork industries, such as Brazil.
- After declining in 2009 and 2010, U.S. broiler exports rise through the rest of the projection period. Major U.S. export markets include China, Russia, and Mexico. Longer term gains in these markets reflect their economic growth and increasing consumer demand. Demand for poultry also remains strong due to its lower cost relative to beef and pork. U.S. producers continue to face strong competition from other major exporters, particularly Brazil. For most of the projection period, exports from avian influenza-affected countries are expected to be limited to fully cooked products.
Despite higher feed costs, strong farm-level milk prices in 2007 encouraged milk producers to increase cow numbers in 2008. Combined with an upward trend in output per cow, milk production rose relatively strongly. Milk production is projected to continue rising over the projection period, although at a slower pace than in the past several years.
- Milk cow numbers are expected to resume a more typical path of year-to-year declines after 2008. However, annual reductions are more moderate compared with past decades as increasing specialization of dairy farms over time slows exit rates from milk production.
- Milk output per cow is projected to increase, although some slowing in these gains occurs in 2008-10 in response to higher feed costs. Nonetheless, further development of specialized operations in most regions will contribute to a continuation of gains in output per cow.
- Domestic commercial use of dairy products increases somewhat faster than the growth in U.S. population over most of the next decade. Cheese demand benefits from greater consumption of prepared foods and increased away from-home eating. However, per capita consumption of fluid milk is expected to continue to decline slowly.
- U.S. exports of dairy products decline from the levels reached in 2008, but remain high by historical standards. Global demand for dairy products has grown as incomes in developing countries have risen. Exports on a skim-solids basis fall less than fat basis exports due to commercial sales of non-fat dry milk.
- Farm-level milk prices fall from the high levels of 2007 and 2008, partly reflecting the reduction in U.S. dairy product exports from the 2008 peak. Milk prices rise over the latter part of the projection period, although increases are less than the general inflation rate largely due to efficiency gains in production.
Long-Term Projection Tables
Other Topics in the Online Baseline Presentation
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