US meat industry set to expand, may face stiffer competition in export markets

Production in the US is expected to see expansion in pork and beef sectors, followed by poultry, reported Rabobank in the Global Animal Protein Outlook for 2018. Low animal feed costs are one factor supporting that expansion.  

Overall, the outlook for the US industry is cautiously optimistic in terms of animal production, said Christine McCracken, executive director, senior analyst for animal proteins, Rabobank.

There also has been some discussion that the Trans-Pacific Partnership (TPP) may be back on the table. “If that is the case, that would be very positive,”​ she said.

Justin Sherrard, global strategist animal protein, Rabobank, anticipates more competition for the US in export markets because production is increasing in most parts of the world.

Additionally, production in some regions may be started to expand past local demand. In Mexico, there could be more competition for pork and poultry markets, he said. Looking at China and throughout parts of Asia, there could be competition in poultry.

“If we’re talking about beef, again the US is competing strongly in Korea and Japan,”​ he said. “But Australia is increasing its production, Brazil is increasing its production and they’re also tied to these markets.”​

Australia also has the tariff advantage with Japan based on trade agreements, said Sherrard.

“The US has export [market access] now for beef to China, and that’s a great development on from last year,” ​he said. “But the industry still needs to get itself organized, or better organized to capitalize on that, in adopting the traceability systems which China sets up as a prerequisite.”​

Alternative proteins in feed​

Along with the potential for expansion and trade in animal proteins, there have also been some developments in the market for alternative proteins, including those used in animal feeds, said Sherrard.

“We’ve got some great developments that are happening there whether you’re looking at algae, whether you’re looking at insects,”​ he said. “We’ve got some great developments in the pipeline there, but the thing that is going to drive that forward is probably fishmeal and fish oil prices.”​

Other efforts that would fit in the sector of alternative proteins would include the methane gas to protein production that some companies are exploring, he added.

High prices in the fishmeal and fish oil markets and volatility in the price of marine-based product tend to be the driver of alternative proteins for feed, he said. “We’re not seeing high prices and volatility in fishmeal, fish oil prices at the moment, they’ve stabilized, they’re coming down a little bit,”​ he added.

“There have been a couple of good catches off the coast of South America, so now we’ve got to say what’s a secondary or tertiary driver to pull these alternatives through?” ​said Sherrard. “Because experimentally, they’re wonderful, they perform well, but they’re not going to be able to compete until they’ve got scale, and they’re not going to get scale until they’ve got strategic investors behind them.”​

While there are some companies making strategic investments in the sector, scale-up is not expected in 2018, he said. “We’re not going to see material volumes in 2018 because they can’t ramp up that much,” ​he added.

Weather-related price volatility, like the start of an El Nino weather cycle, could trigger additional investment in the sector, he said. However, that type of volatility can be hard to predict.

“If we were to see a disruption in that market, if we were, then that would be the sort of thing you’d need to see to trigger an acceleration or a scaling­-up,” ​he said.