It’s Pork Over Beef in America for First Time Since 1952Megan Durisin
In the U.S., the country that made the hamburger a global icon of American fast-food cuisine, beef is about to fall another spot on the meat scale.
For the past two decades, chicken has outranked beef as the most produced meat, and now pork is about to surpass it as well. Hog herds have rebounded from a deadly virus last year, while record-high meat prices and cheaper feed led to breeding of more sows and bigger pigs. As pork output in 2015 jumps 4.6 percent to a record, cattle ranchers have yet to recover from a 2012 drought, and beef production is headed for a 22-year low, the U.S. Department of Agriculture estimates.
When porcine epidemic diarrhea virus killed millions of piglets across the country in 2014, prices for bacon and pork chops surged to all-time highs as supplies tightened. With more hogs arriving in recent months and demand increasing, costs are dropping for buyers including Domino’s Pizza Inc. and Hormel Foods Corp.
“A year ago, it looked like the sky was going to fall,” said Ed Juhl, a farmer in Hudson, Iowa, who lost about 2,400 pigs to the virus in June. His herd is now healthy, he expects output by June will be back to its annual sales pace of 36,000 animals. With each passing week, the industry’s “confidence that we’re going to increase pork supply is rapidly going up.”
That’s because the breeding-sow herd, during the three months ended Dec. 1, posted the biggest increase since 1998 and reached the largest in five years, the government reported Dec. 23. The total hog population jumped 2 percent from a year earlier to 66.05 million, the most in five quarters.
After two years of bumper corn and soybean crops, feed is cheap and that means hogs are getting bigger. On average, pigs for slaughter weighed 216 pounds last year, touching a record 222 pounds in May, compared with 208 pounds in 2013.
Pork production will climb this year to a record 23.908 billion pounds, as per-capita consumption reaches the highest in five years, the USDA said Jan. 12. Beef output will drop 1.7 percent to 23.901 billion while chicken jumps to an all-time high of 39.206 billion pounds, government data show.
The pickup in supply sent hog prices on the Chicago Mercantile Exchange tumbling 11 percent in January, the biggest drop for the month since at least 1986, data compiled by Bloomberg show. The Bloomberg Commodity Index lost 3.3 percent, and the MSCI All-Country World Index of equities slid 1.6 percent.
CME futures that touched a record $1.33425 a pound in March fell to 70 cents Jan. 23, a four-year low. The price, which closed at 70.875 cents today in Chicago, may drop to 65 cents this year, said Don Roose, president of U.S. Commodities Inc. in West Des Moines, Iowa.
With wholesale pork already down more than 40 percent from a record in July, prices for the meat on average will be down “significantly” this year, said Jim Robb, director of the Livestock Marketing Information Center in Denver.
The slump may not last if hog production slows or demand accelerates further. Disease still poses a risk to hog supply because PEDv thrives during cold winter months, said Paul Sundberg, vice president of science and technology for the National Pork Board in Des Moines. While immunity and prevention have improved, “I don’t think anybody wants to say, ‘Boy, we dodged a bullet,’” just yet, he said.
Heavier hogs also may not be sustainable. Bigger herds mean more crowded pens, so farmers may not be able to keep the animals as long as before, said David Preisler, executive director of the Minnesota Pork Producers Association in Mankato.
Slaughter weights “are going to be slightly lower,” said Altin Kalo, a livestock analyst at Steiner Consulting Group in Manchester, New Hampshire.
Demand for pork also is improving, especially with record-high beef forcing some consumers to seek cheaper meats.
“There’s a good chance more and more consumers will go the way of pork and chicken,” said Will Sawyer, Atlanta-based vice president of U.S. animal-protein research for Rabobank International.
For now, hog producers still have an incentive to expand. Juhl, the Iowa farmer, said he has remained profitable even after the plunge in cash prices. He sold hogs in late January at around the mid-$50s per 100 pounds, compared with last year’s peak of $103, he said.
Pork costs have “come down dramatically” at Ann Arbor, Michigan-based Domino’s, the largest U.S. pizza chain after Yum! Brands Inc.’s Pizza Hut, Chief Financial Officer Michael T. Lawton said on a Jan. 14 teleconference. “That’s got a big impact on us because it goes into our pepperoni and our sausage.”
The pork surplus isn’t getting any help from the strong dollar, which is slowing U.S. exports. Shipments fell from a year earlier in each of the five months through November, the most-recent government data show.
“We have to try to absorb that pork in the domestic market,” U.S. Commodities’ Roose said. “We already have a surplus coming at us.”
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.