April 20, 2007

High beef and chicken prices in US in the offing

Meat prices in the US are expected to jack up in 2007 and 2008 as a result of higher exports, subdued growth in production and the increasing US population, according to quarterly forecasts of the  economic firm Steiner Consulting Group (SCG).

Choice beef cutout value is forecast to increase 10 percent in 2007 and inch further by 3 percent in 2008. Cutout prices are expected to be as much as 25 percent higher than the five-year average in 2008. Imported 90CL prices (in US cents per pound terms) are predicted to rise 9 percent in 2007 and to rise by 7 percent in 2008. However, returns to exporters are likely to remain subdued due to the strong Australian and New Zealand currencies.

Higher feed costs are predicted to hamper beef production over the coming two years. Production in 2007 is projected to rise just 0.3 percent above 2006 levels, but then drop 0.6 percent in 2008.

The decreased production in 2008 is mainly due to lower cow slaughter resulting from improved pasture conditions.

SCG expects the full resumption of the beef and cattle trade with Canada to have a limited impact on supplies in late 2007 and in 2008. The United States Department of Agriculture's requirement to only allow imports of animals born after 1 March 1999 is expected to limit the number of Canadian live cattle entering the US. But it is expected to see some additional Canadian lean beef trimmings in the US market. American beef exports in 2007 are projected to rise by 20 percent on year ago levels and a further 12 percent in 2008. Exports in 2008 are still expected to remain nearly 40 percent below pre-BSE levels.

US beef imports may fall 0.8 percent in 2007 due to the continued high demand for imported beef in alternate export markets and the weakening US dollar.

With chicken prices at historically low levels in 2006, SCG says it is not surprising that prices are expected to move higher in 2007. However, the extent of the increase will be significant - a 44 percent rise in chicken breast prices on 2006 levels and 15 percent above the five-year average. Prices are projected to rise by a further 9 percent in 2008 and be 25 percent above the five-year average. Chicken production in 2007 is forecast to be 0.2 percent lower than 2006 levels - the first time since 1975 that chicken production is predicted to post a year-on-year decline. The drop is due to high corn prices over the first half of the year and the resulting lower numbers of chick placements.