Protein glut expected to ease

Protein glut expected to ease

In new research report, CoBank says protein market conditions are expected to improve in 2016.

A major agribusiness lender says protein stocks are coming more in line with overall levels of demand.

In a new research report, CoBank says the supply glut that plagued U.S. beef, pork and poultry markets last year is expected to ease in 2016.

“It’s clear that in the coming year, the headwinds and adverse conditions created by excessive protein stocks are clearing,” said Trevor Amen, animal protein economist with CoBank. “Surprisingly strong U.S. consumer demand helped lay the groundwork for improving market conditions in the coming year, meaning the net trade balance is expected to shift toward growing exports and fewer imports.”

A CoBank report says beef prices are expected to remain under pressure for the next two years.

Protein exports are expected to remain a challenge in the first half of 2016. However, imports of lean beef should slow significantly and domestic consumer demand for beef, pork and poultry is expected to remain strong. Supply imbalances have begun the correction phase, with supply and demand expected to achieve equilibrium by mid-year. The strength of consumer demand will impact how much and how soon U.S. meat prices change.

Pork and chicken prices have upside potential compared to last year’s low levels, but beef prices are likely to remain under pressure for the next two years as the industry comes off cyclical price highs in 2014.

Amen cautions that optimism for 2016 should be tempered by oversupply lessons of 2015.

“Total red meat and poultry production set an all-time high in 2015,” he said. “Combined with fewer exports and more imports, total domestic meat supplies surged by 4.4 percent, the highest year-over-year increase in 40 years.”

However, the long-term outlook remains positive, especially with continued global middle class growth.

“The increasing demand for a higher-quality diet likely provides domestic protein producers with significant opportunities in the next decade.” Amen said.

A synopsis of the 2016 Protein Demand Outlook Report is available at www.cobank.com.

Source: CoBank

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