Factors affecting livestock and poultry – production cost, feed cost, prices – U.S. Dept. of Agriculture. Economic Research Service report
Large red meat and poultry supplies and a weak economy are pressuring livestock and poultry prices. In 1990, per capita income declined fractionally from 1989, but is expected to decline about 1 percent this year. In 1992, the recovering economy is expected to boost per capita income over 2 percent from this year.
Improvement in employment and gross national product with moderate inflation is the most likely scenario over the next few months. However, economic growth could be erratic. The real gross national product in 1991 is expected to be about the same as in 1990, but a 3- to 4-percent gain is expected in 1992 over 1991. However, the increase would be relatively small for a recovering economy.
The rate of inflation in 1991, as measured by the GNP deflator, is expected to be slightly lower than 1990’s 4.1 percent. Prices of basic materials suggest little inflationary pressure. So the rate of inflation in 1992 is expected to be between 3 and 4 percent.
The relatively weak economy and modest inflation continue to put downward pressure on interest rates. The bank prime rate this year is expected to average around 8.5 percent, compared with 10 percent last year. In 1992, the prime rate is expected to average between 7 and 8 percent.
Feed costs are expected to be about the same in 1992 as in 1991. The 1991 corn crop is projected to be down 447 million bushels from 1990, causing a drop in carryover stocks. The September 1, 1992, carryover is projected at 1,284 million bushels, compared with 1,521 million this September. The farm corn price is expected to average $2.15-$2.55 per bushel in 1991/1992, compared with $2.28 in 1990/1991.
Soybean production in 1991 is estimated at 1,962 million bushels, slightly higher than in 1990 and 1989. Thus, soybean meal prices (44 percent, Decatur) are expected to average $165-$185 per short ton in 1991/1992, about the same as in the 2 previous marketing years.
Large Supplies Depress Processing Meat Prices
Very large pork and poultry production in second-half 1991 has expanded availability of trimmings and processing meats. Because of expanded supplies of these meats, wholesale prices of trimmings and other processing meats have been under pressure. Pork trimmings prices have been depressed, particularly fatter pork trimmings–42 percent lean fresh pork trimmings in November were trading at $16 to $19 per cwt, compared with around $40 a year ago. Because formulations of many sausage products allow substitution among trimmings materials, the lower price for pork trimmings give a strong incentive to expand their use.
Increasing amounts of turkey meat have been used for processing and in some formulations have displaced pork trimmings. The abundant supply of pork trimmings at attractive prices is expected to compete increasingly with processing turkey meats.
Further expansion in pork and turkey production in 1992 will continue to boost the already abundant supply of processing meats. The factor that will influence wholesale processing meat prices next year is growth in consumption or export of products using these meats. In the short term, freezer stocks for processing type meats will likely expand.
Lean processing beef, mostly from cows, bulls, and imports will be less directly affected by the lower priced pork trimmings and poultry processing meats. Much of the processing beef is already priced out of mixed formulations and is mostly used in hamburgers other beef-specific products.
COPYRIGHT 1991 U.S. Department of Agriculture
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