Competing for Dollars
Victoria G. Myers Progressive Farmer Senior Editor
Mon Apr 20, 2015 11:01 AM CDT
(Page 1 of 2)

Stand near the grocery store meat counter and watch for a while. Around 6 p.m. you'll see a day-weary mom looking at the ribeyes or the packets of ground. Sometimes she'll pick up a few steaks and put them in her basket. Often, though, it's the poultry or pork section she is drawn to, where in-store specials make it hard to walk away from anything that's $1.99 a pound these days. Every hour, every day, this race for buyers is going on at meat counters across the country.

Beef has some catching up to do, but there is opportunity ahead. (Image: Thinkstock)

Beef is far from a loser in this dinner-time challenge. It's not exactly the big winner either. Beef, after all, is not a sprinter when it comes to markets. It's more of a long distance competitor. To see where beef is headed, you have to look at the spreads.

The price spread between beef, pork and poultry will pose both an opportunity, and a challenge, in the year to come, said agricultural economic guru Chris Hurt of Indiana's Purdue University. He said the key to understanding today's meat market lies in a look at U.S. per capita availability, which has seen a dramatic reduction since 2007, of some 20 pounds. Keep that figure in mind, because it's all about to change.

"The low weather mark is 2014," said Hurt. "We went from 223 pounds of meat per person, to 203 pounds. It was due to a combination of high feed prices and the drought across the Southern Plains."

Hurt said if projections hold, 2015 will see 6 pounds of that 20 returned -- a near 30% recovery in just one year. Most of those 6 pounds are expected to come from the nimble chicken industry, projected to increase supplies by 3.6 pounds per person. It is still unknown how big an impact the H5N2 bird flu might have on this rebound, as well as on the supply of turkey, projected to be up by 0.5 pounds this year on a per capita basis. Pork producers will up their offerings 2.3 pounds. Beef, on the other hand, is expected to be down 0.2 pounds per person.

"We are dealing with biology," said Hurt. "Which species can respond more quickly is the first to improve supply, and that is the chicken. An egg hatches in 21 days, and in 5 to 6 weeks that broiler is grown out. So in 8 to 9 weeks you can increase supply."

Pork, he continues, takes about 10 months from breeding to get more meat into the supply chain. And beef, well it's a snail's pace if you consider 9 months gestation and a couple of years from there to the packing plant.

"It's a two to three year time period from the moment you start to retain heifers, to get more beef into the market. We started that process in 2014, but we won't see more beef till 2017. It's the nature of the sector," said Hurt.

Looking at year-over-year production levels, the economist said pork production should climb 5% to 6% in 2015. Market prices peaked last September, at a USDA composite price of $4.21 per pound. January had pork down to $3.99. Broiler production is projected up 3% to 4%, despite which market prices are expected to hold in the range of 97 cents to $1.03 per pound this year. They averaged $1.05 for 2014. Turkey production was expected up 5% to 6%, a large percentage for a small player. Market prices are projected to range between $1.02 and $1.08 per pound for 2015, after averaging $1.07 in 2014.

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