Experts are foreseeing tough year for the US meat industry
The US meat industry may need the rest of the year to get back on track with processing capacities. In the last few weeks, there was an improvement in terms of slaughter numbers but those figures are still behind last year's records for this period. The biggest impact has been seen in the beef sector, which is at least 1 million head short in the last month and a half. Last week USDA reported estimated slaughter at 499,000 head, which was about 14% higher than two weeks ago. Expectations are for harvest to total about 530,000 this week.
Still, last week’s slaughter was 25% lower than the same week a year ago, and slaughter since the second week of April has totaled 2.875 million head, or 1 million head lower (-27%) than the same period a year ago, according to Drovers magazine. In April, a slowdown in processing operations and plant shutdowns due to COVID-19 infections reported among workers has reduced the processing capacity for beef at 55% and it will slowly move towards 80% by the end of Q2, said Sterling Marketing president John Nalivka.
Much more optimistic, analysts consulted by Bloomberg believe that the industry is now at 75% from the data recorded last year. Nevertheless, the impact is also visible in some of the main export markets. In the last month, US beef shipments to Japan and Korea have declined at a time when they are usually ramping up to meet elevated demand over summer. Shipments to Japan were 22% below the previous four-week average, and those to Korea were 17% lower, says Meat and Livestock Australia in a recent analysis.
The USDA May World Agricultural Supply and Demand Estimates report now has production pegged to contract 5.1% and exports to ease 4.2% in 2020. The USDA have Q2 2020 beef production projected to contract 17.3% year-on-year, followed by a partial recovery in Q3 (back 7.5% year-on-year) and Q4 (back 2.9% year-on-year).
At the same time, pig producers in the US are still forced to euthanize a large number of animals due to the drop recorded in processing capacities across the country. "Some market hogs are getting euthanized how many is mostly a guess. No one wants to publicize this grim reality. In the meantime, sow herd liquidation is ongoing. We need to keep seeing increased hog harvesting. Up 500,000 head a week in the last two weeks is the right direction. Packers have huge financial incentives to get hogs through their plants with record Gross Packer Margins. We hope and are optimistic that harvesting numbers will continue to increase," commented Jim Long, president and CEO of Genesus Inc. Meantime, US meat prices will continue to increase at a fast pace due to the shortage reported in the market and the ongoing COVID-19 crisis.
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