WASHINGTON, April 30, 2014 – Despite years of high feed costs and tight margins, the outlook for livestock and poultry appears to be improving, but significant challenges face the beef and pork sectors, a top USDA official told a House panel Wednesday.
Before the House Agriculture Committee’s Subcommittee on Livestock, Rural Development, and Credit, USDA chief economist Joseph Glauber told lawmakers that record high output prices and reduced prices for grains and oilseeds are being tempered by the ongoing drought and the spread of porcine epidemic diarrhea virus (PEDv). Still, Glauber showed overall optimism about meat sales.
“All meats are hot,” Glauber said. “I think we’ll see some higher prices, and may see more chicken eaten…demand keeps growing.”
During the hearing to review the state of the livestock industry, Glauber said production of red meat and turkey production is forecast lower for 2014, and although broiler production is forecast to increase, the gain will be insufficient to offset declined in the other meats. Livestock and poultry prices will be higher in 2014, reflecting tight overall meat supplies and improving demand, he said.
Glauber said despite global production records for most grains and oilseeds in 2013, global grain and oilseed stocks remain tight going into the 2014/15 crop year. As such, he said, feed costs and livestock margins will remain vulnerable to potential supply shocks throughout the year.
During the hearing, organizations involved in the livestock sector laid out a litany of concerns to lawmakers.
Roger Johnson, president of the National Farmers Union, said decreasing market competition poses a threat to livestock producers, noting that there are fewer large buyers of livestock currently than any other time in recent history. Johnson said studies show that the top four beef producers control more than 81 percent of the sales of cattle for slaughter in the United States, and the top four swine processors control about 65 percent of hog sales.
“Regulators must oversee and prohibit anti-competitive behavior by the most powerful companies and interests,” Johnson said. He said “budding sectors of the agriculture economy,” such as small livestock production and biofuels, need to be supported in their development.
Shane Miller, senior vice president of Pork Margin Management at Tyson Fresh Meats, said free trade issues, such as the Trans-Pacific Partnership (TPP), and the mandatory country-of-origin labeling (COOL) program are among his company’s top concerns.
Miller said TPP holds great promise for the U.S. livestock and poultry industry only if Japan and the other deal participants agree to significant tariff reductions. On COOL, Miller said the pending World Trade Organization (WTO) challenge against the U.S. program could bring about a damaging disruption to trade, as a result of retaliatory action from Canada and Mexico.
However, Miller said, “Taken as a whole, we believe the picture for the protein sector is a positive one.” He said demand remains strong and he sees room for growth in areas of value-added and convenience.
Mike Smith, a rancher speaking on behalf of the National Cattlemen’s Beef Association, leveled criticism against the COOL program, saying his industry has incurred costs associated with mandatory labeling, while a vast majority of consumers “don’t even look at the COOL label when buying beef.”
Supporters of COOL have insisted for years that the U.S. public wants to know the country of origin of their food, particularly meats. They argue that a package of ground beef can possibly contain meat from several different countries.
Matt Cook, president of Norbest Inc., spoke on behalf of the National Turkey Federation and blamed the Renewable Fuel Standard (RFS) for what he described as volatility in feed supply costs. “Twice in periods lasting about a year each, an unexpected oversupply of turkey brought prices down – yet our purchase of corn and soy meal to feed turkeys remained uncommonly costly,” Cook said.
The EPA in November issued a proposal to lower the RFS requirement for 2014 by 16 percent, from the initial congressional mandate of 18.15 gallons of ethanol and biodiesel for blending into gasoline to 15.21 billion gallons. The plan is now undergoing interagency review at the White House Office of Management and Budget.
William Roenigk, senior vice president and economist for the National Chicken Council, also expressed concerns about the RFS, saying it imposes biofuel blending requirements that “greatly and negatively impact the chicken industry” due to increased feed costs.
Roenigk said when the original RFS was implemented during the 2005-2006 crop year, the ethanol industry consumed about 15 percent of the corn crop, and in 2013-2014, ethanol will consume about 40 percent of the corn crop.
The Renewable Fuels Association have argued that “tremendous” increases in the productivity of U.S. farmers have ensured amply supplies of grain are available for domestic and international use as food, feed and fuel. RFA further said every bushel of grain processed into ethanol is enhanced and returned to the animal feed market in the form of distillers grains, corn gluten feed or corn gluten meal. Also, RFA said that by increasing demand for corn and raising corn prices, ethanol helps to lower federal farm program costs.
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