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Projections for the livestock sector include production adjustments in response to high grain and soybean meal prices resulting from the expansion of corn-based ethanol production. Returns to U.S. meat and poultry production fall levels in recent years, slowing increases in or reducing production of all meats over the next several years. Once the sector adjusts, lower overall production combined with strong domestic demand and some strengthening in meat exports result in higher prices and higher returns, providing economic incentives for expansion in the sector and a resumption in meat production gains.
Production of all meats slows or declines in the first half of the projection period, reflecting higher feed costs as more corn is used in ethanol production. Distillers grains, a coproduct of ethanol production, can be used in livestock rations, partially substituting for corn and sometimes for soybean meal. However, distillers grains can more easily be used by ruminants (such as cattle) compared to monogastric animals (such as hogs and chickens). Beef cattle feedlots located close to ethanol plants are best situated to benefit from a steady supply of distillers grains, also reflecting the ability of those animals to use the wet form of distillers grains. Meanwhile, distillers grains are less suitable in poultry and hog rations.
- Higher grain prices as well as effects of drought in recent years hold down cattle inventories, pushing U.S. beef production down in 2008-10. Production then rises in the remainder of the projection period as returns improve and herds are rebuilt. The cattle inventory remains in a range of 96-99 million head throughout the projections. Rising slaughter weights contribute to the moderate expansion of beef production beyond 2010. Higher costs of feedlot gain will result in stocker cattle remaining on pasture to heavier weights before entering feedlots.
- Pork production declines in 2009-11 in response to higher feed prices and then grows for the remainder of the projections as higher hog prices improve returns. Production coordination and market integration between the United States and Canada continue in the hog sector. Canada is the major supplier of live swine imported by the United States. Imported feeder pigs from Canada are finished and processed in the United States, where both finishing and processing costs are lower.
- Poultry production slows in 2009-13 while adjusting to higher feed costs, but begins to rise towards the end of the projections period. During the period, rising exports account for a larger share of total production.
Livestock sector production adjustments to higher feed costs as well as gains in meat and poultry exports result in higher consumer prices and lower per capita consumption. Annual per capita consumption of red meats and poultry falls from 222 pounds in 2006 to a low of 214 pounds in 2012-14. Per capita consumption of red meats and poultry then resumes growth to almost 217 pounds in 2017.
- Per capita beef consumption declines through the projection period, reflecting production adjustments in the industry to higher feed costs. U.S. beef exports rise through the projection period, further limiting domestic per capita beef consumption. A gradual rebuilding of U.S. beef exports to Japan and South Korea is assumed.
- Strong demand for consistent, high-quality beef continues in the domestic hotel and restaurant market, and increasingly in the retail market. Demand for U.S. beef in export markets is also primarily for high-quality beef.
- Higher feed costs lead to reductions in pork production, which combine with rising pork exports to push per capita pork consumption down through 2012. A gradual rebound in per capita pork consumption occurs over the remainder of the projection period as production gains strengthen.
- Due partly to higher feed conversion rates, poultry prices remain lower than red meat prices. However, as returns are squeezed, slower production growth and higher exports result in per capita consumption declines in 2010-12. Following these adjustments, production strengthens and per capita consumption slowly grows toward the end of the projection period.
Livestock prices rise through most of the projection period reflecting production adjustments in response to higher feed costs.
Rising incomes facilitate gains in consumer spending on meat. Nonetheless, overall meat expenditures represent a declining proportion of disposable income, continuing a long-term trend.
Although the domestic market remains the dominant source of overall meat demand, exports account for a growing share of U.S. meat use. Despite higher prices, U.S. meat exports rise throughout the projection period as global economic growth and a continued weak U.S. dollar support increases in demand.
- U.S. beef exports primarily reflect demand for high-quality fed beef, with most U.S. beef exports typically going to Mexico, Canada, and markets in Pacific Rim nations. A gradual recovery of U.S. beef exports is assumed in the Japanese and South Korean export markets lost following the first U.S. case of bovine spongiform encephalopathy (BSE) in December 2003.
- U.S. imports of processing beef from Australia and New Zealand increase in the projections. With more demand in East Asian markets being met by the United States, exports from Australia and New Zealand are reduced, resulting in more of their product being shipped to the United States. The United States is a net beef importer by volume throughout the projection period as the recovery of high-quality fed beef exports does not reach levels of 2000-03 until the last several years of the projections.
- Pacific Rim nations and Mexico remain key markets for long-term growth of U.S. pork exports. Brazil is also a major pork exporter. However, no changes in the set of countries recognizing Brazil as free of foot-and-mouth disease (FMD) are assumed, thus limiting Brazilian pork producers' ability to compete in some markets. Consequently, Brazil's pork exports expand to markets such as Russia, Argentina, and Asian markets other than Japan and South Korea.
- Despite higher feed costs, increased efficiency in U.S. pork production enhances the competitiveness of U.S. pork products. Nonetheless, longer term gains in U.S. pork exports will be determined by costs of production and environmental regulations relative to competitors. Such costs tend to be lower in countries which are developing integrated pork industries, such as Brazil.
- The value of the U.S. dollar relative to currencies of other pork exporting countries is expected to enhance U.S. pork export volumes, particularly in the early years of the projection period.
- U.S. broiler exports rise through the projection period, although at a slower pace than in earlier years. Major U.S. export markets include China, Russia, and Mexico. Gains in these markets reflect economic growth and increasing consumer demand. Demand for poultry also remains strong due to its lower cost relative to beef and pork. U.S. producers will continue to face strong competition from other major exporters, particularly Brazil. For most of the projection period, exports from avian influenza-affected countries are expected to be limited to fully cooked products.
In 2007, U.S. prices for farm-level milk and for dairy products, such as cheese, nonfat dry milk, and dry whey, were high relative to historic levels due in part to the international dairy situation. Relatively high prices are expected to extend into 2008. As incomes in developing countries have grown, so has the global demand for dairy products. World milk supplies have been tight, however, due in part to reform of the Common Agricultural Policy (CAP) in the European Union and drought conditions in Australia. The U.S. dairy industry has become a major commercial exporter of nonfat dry milk, dry whey products, and cheese. Although U.S. milk production grew significantly in 2007, the growth was limited by high feed costs relative to historic levels and tight supplies of dairy heifers.
- Despite higher feed costs, strong farm-level milk prices are projected to encourage further increases in milk cow numbers through 2009. Combined with an upward trend in output per cow, the results are relatively strong gains in milk production in 2008 and 2009 and decreases in milk prices. Smaller production gains are projected on average over the rest of the projection period because milk cow numbers decline after 2009.
- Milk output per cow is projected to increase, although some slowing in these gains occurs in 2009 and 2010 in response to higher feed costs. Nonetheless, further development of large, specialized operations in most regions will contribute to a continuation of gains in output per cow.
- Milk cow numbers are expected to decline after 2009, although reductions are moderate as increasing specialization of dairy farms over time slows exit rates from milk production compared with past decades.
- Commercial use of dairy products increases slightly faster than the growth in population. Cheese demand benefits from greater consumption of prepared foods and increased away-from-home eating. However, per capita consumption of fluid milk is expected to continue to decline slowly.
- Farm-level milk prices decrease in 2009 from recent high levels as milk production gains are relatively strong. Milk prices then rise through the rest of the projections, but increases are projected to be less than the general inflation rate. Efficiency gains in production accommodate moderately higher overall per capita consumption at declining real prices.
Long-Term Projection Tables
Other Topics in the Online Baseline Presentation
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