U.S. livestock producers urged to look overseas

U.S. livestock producers will have to reach out to foreign consumers to restore profits, according to a report by two Federal Reserve economists.

Demand for meat is down at home because of the recession, and it likely will be slow to return even after the economy turns around, the report said.

But in developing countries, including China and India, consumers’ incomes are growing, along with their demand for protein. And that creates market potential for U.S. hog, cattle and dairy producers.

“As stronger economic growth emerges in developing countries, foreign consumers will enjoy some of the fastest-growing disposable incomes in the world, with per-capita meat consumption patterns to match,” said economists Brian Briggeman and Jason Henderson at the Omaha branch of the Federal Reserve Bank of Kansas City, Mo.

In 2008 and this year, they said, U.S. profits from cattle and hogs disappeared because of lagging demand and high fuel and feed costs.

Farmers and ranchers are reducing herd numbers, the traditional response to falling demand and high costs. Herd reductions may continue next year and should help balance supply and demand, the report said.

But in previous recessions, demand for meat has lagged for a year or more even after recovery begins, they said, and prospects are high for “anemic” employment growth after the current recession.

“Contractions in expenditures during the current recession could be an ominous sign of steeper contractions going forward,” the economists said.

China’s economy, meanwhile, is growing by 6.7 percent so far this year and may grow an additional 8 percent in 2010, and a rising middle class is boosting protein consumption, the report said.

In the United States, meat consumption rose 18 percent from 1975 to 2009, but in China it went up 532 percent, the economists said. Milk consumption is up 3,000 percent in China.

Competing in international markets means overcoming food safety issues and creating products attractive to foreign tastes, and the U.S. meat industry must make that effort, the report said.

“The industry has traditionally innovated to meet ever-changing consumer tastes and preferences at home,” the report said. “As foreign countries emerge from poverty, the lessons livestock producers have learned about demand at home may hold for demand abroad.”

Contact the writer:

444-1080, steve.jordon@owh.com

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