If the consumer is king, the lurching U.S. economy threatens to be a royal pain for beef and pork producers.
Rallying cattle and hog prices restored producers’ profits this spring following more than two years of losses. Whether those high prices continue hinges largely on demand, economists say, and recent signs have been mixed.
Job growth last month was smaller than expected, and
“The consistent story so far has been weaker than expected demand” for beef, said Glynn Tonsor, an assistant professor of livestock and meat marketing at
Last month, USDA, in its monthly Supply and Demand report, cut its projection for U.S. beef consumption in 2010 to 59.3 pounds per person from a previous estimate of 59.7 pounds.
The revised figure is down 3.1 percent from 2009 and would be the lowest per-capita consumption since 1952, according to USDA data. Additionally, USDA cut its pork consumption forecast to a 32-year low.
Consumer pork demand has shown signs of softening in recent weeks, however, packer demand for live hogs remains strong, making for some mixed signals for the market.
USDA is scheduled to release its next Supply and Demand report today at 7:30 a.m. Central time.
Among the major meats, beef demand is the most sensitive to employment and household income trends, Tonsor said. “Current weakness in beef demand is largely tied to reduced consumer incomes,” he said. With many Americans still out of work, “you have less income available for meat purchases.”
“The recession may be over on paper but a lot of people continue to struggle with debt and lower property values,” say Steve Meyer and Len Steiner, economists and CME market report authors. “On the demand side, things do not appear to be quite as good as some had hoped for.”
Pork, though typically cheaper than beef, also faces eroding demand.
During the four weeks ending April 25, fresh pork sales fell 11 percent from the same period a year earlier, to 233.5 million pounds, according to FreshLook Marketing. Dollar sales fell 7 percent, to $517.8 million.
In May, the USDA reduced 2010
While livestock futures have tumbled from multiyear highs reached in April and May, further price declines may be limited because animal inventories have shrunk.