DENVER - Greater production, coupled with lower export demand, has led to a surplus of beef, chicken and pork, resulting in the lowest meat prices consumers have seen in years.
"We'll see improved beef specials and meat features through the spring and summer," said Randy Blach, executive vice president of Cattle-Fax, Denver. "The large supplies will equate to greater choices for consumers and retailers."
Beef production is up 5% to 6% compared to last year, according to Blach. "We'll continue to have growth of not only beef, but pork and poultry as well," he said. "Drought forced record large numbers of cattle into our feed yards and that will affect production for the next five to six months."
Export bans have also led to a beef surplus. In December, Japan lifted its two-year ban on imports of American beef that was imposed after the United States' first confirmed case of mad cow disease in December 2003.
The ban was reinstated just one month later after Japan received a shipment of U.S. veal cuts containing backbone, which is banned under the export agreement Japan had with the United States.
Japan was the biggest beef export market for the U.S.
"Once the Japanese export market was closed again in January it was a real blow to the industry," Blach said. "We anticipate that the Korean market will open again in about 60 days and the Japanese market should open back up sometime this summer. That should help to alleviate some of the surplus."
In the meantime, meat producers and processors are contending with lower prices.
"This quarter's results reflect the depressed markets and the oversupply of all proteins," said John Tyson, chairman and chief operating officer, Tyson Foods, in a statement related to its second-quarter results. "The beef segment suffered from low-capacity utilization and declining boxed beef prices. The negative effect of high live cattle prices and lower sales prices was made worse by interruptions in export markets. Those factors combined to produce significant losses in the beef segment. The protein oversupply, in addition to higher operating costs, affected our pork segment as well."
Although its chicken sales volume was up, Tyson's operating income was negatively affected by lower average sales prices. The cuts were due to an oversupply of proteins in the marketplace and the discovery of the H5N1 avian influenza virus in foreign markets, which affected export prices.
"The prices are beginning to rebound a bit," said Richard Lobb, spokesman for the National Chicken Council, Washington. "The decrease has been attributed to softness in U.S. export markets like Turkey, Ukraine and Romania where bird flu was found. Consumers in those countries shied away from poultry across the board."
Still, the discovery of the H5N1 strain of bird flu and its effect on consumption in international markets may not be contributing substantially to a surplus of product in the U.S. Exports to Russia for the first couple of months of 2006 were actually up, compared to the same time period last year, though exports dropped 7% from January to February, said Toby Moore, spokesman for the USA Poultry & Egg Export Council, Stone Mountain, Ga.
The U.S. exports 14% of the poultry it produces and the Russian market accounts for 30% of all the exports.
"The international market reacted negatively to all of the reports of consumption decreases [overseas], sending prices down," Moore said. "Importers took advantage of the lower market to stock up on cheap chicken leg quarters to put in storage to wait for a market uptick. Are we concerned? Yes, mainly because all this product in storage in big markets like Russia will have an impact on future export sales, unless consumption can be restored to take care of the surplus."
Lower-priced beef doesn't help the chicken industry.
"That is never good news for us - chicken directly competes with beef," Lobb said. "If there is a lot of beef out there, they can't sustain high prices in this kind of supply situation. If beef is cheap, then chicken can't be expensive. It puts a lid on everything else. If beef is cheap consumers will go to beef."
