Competing proteins offer continued challenges for beef industryWritten by Saige Albert
As cattle producers prepare for lower prices in 2016, CattleFax’s Mike Murphy explained that they have more than just the beef industry to be concerned about.
“Another piece of the puzzle is the competing meat standpoint,” Murphy said during a Jan. 20 CattleFax webinar.
“The relationship between pork, poultry and beef will also be important,” he continued. “If we are priced very high relative to our competitors, that could create challenges at different times.”
In the spring and fall, the spread between beef and competing proteins usually isn’t as much of a concern, Murphy explained, but other times of the year, it is more important.
He continued that, from the 2014-15 period, one of the biggest year-over-year increases in terms of tonnage was seen in total domestic supply of protein, including beef, pork and poultry.
Though the increase in 2016 isn’t expected to be as dramatic, Murphy said, “Nonetheless, it will be an increase.”
An jump in pork production is forecast for 2016, Murphy stated, and the global currency climate means that the U.S. is at a risk of reduced pork exports.
“Pork exports aren’t a major factor to worry about but are something we have to have on our radar,” he said.
When looking at the poultry industry, Murphy also noted that one of the biggest competitors from a protein standpoint is poultry.
“High Pathogenic Avian Influenza (HPAI) has reared its ugly head again recently,” Murphy said. “We have seen the state of Indiana start to harvest and render a lot of birds in the region.”
Avian influenza in the U.S. has resulted in the closure of several export markets.
“South Korea has said they are shutting off all fresh poultry exports from the U.S. into South Korea,” Murphy said. “In the big scheme of things, that number is not significant, but as we start to look at overall consumption, HPAI could become more of a concern.”
Additionally, if HPAI were to move into the broiler production region, more poultry would be placed on the domestic market, which provides another concern.
In analyzing trends with competitive meats, Murphy said that boneless, skinless chicken breast is often compared to an 81 percent lean ground beef product.
“As we look at the most recent data and the price range, we are seeing record high levels with this hamburger product,” he explained, noting that the spread is seen at the wholesale level. “This range could easily translate into the retail sector as retailers look for value to give a better pricing point.”
Over the long-term period, Murphy said that producers are also concerned that, as more beef is produced, the range between beef and competing proteins will continue to decrease, which in turn hurts the value of hamburger at the wholesale level and impacts fed cattle values, as well.
From a competitive protein standpoint, he explained, “We will continue to have challenges relative to our competitors at the protein table.”
“Challenges don’t mean that we have a complete disaster on our hands relative to the markets,” Murphy said, “but competing proteins are one more variable that can be causal in our market outlook.”