I have reported and read many reports about the robust demand growth in the U.S. in 2021. Demand is being fueled by more spending capacity of consumers, a rebounding economy and opening up of more foods service in the first half of the year. Consumer spending is hitting record numbers in the first two quarters of 2021 and although economic growth may be slowing, it is still occurring. Latest consumer spending reports from the Federal Reserve show personal consumption expenditures hovered near pre-COVID record levels in the first quarter of 2021 and roughly 6% higher in the second quarter. That robust economic recovery and pent-up demand also brought demand for meat higher, as seen in the prices paid for those products.
Higher prices have been evident year-to-date. There has been much discussion about whether this is true inflation or a price bubble to burst when manufacturing and service sectors catch up with growing demand. I guess I thought that was the definition of inflation; but regardless, it is impossible to know how long this scenario will last. Some prices are beginning to moderate – lumber for one – but most consumer products seem to remain high. Big expenditures for consumers like housing, transportation and food remain high.
The meat industry has benefited so far this year. Pork, beef and poultry prices are all significantly higher than last year. Pork cutout is currently 55% higher than a year ago, choice beef cutout is 50% higher and composite whole bird prices are 63% higher. Based on USDA reports, pork production in the first half of 2021 was up 1.6%, beef production was up 6.6%, broiler production was down 0.3% and turkey production was down 1.7%. Total meat production was up 963 million pounds (1.85%). Exports, net of imports to the U.S., was up 529 million pounds. Available supply after exports grew by 434.07 million pounds (1.0%).
Pork production is up 1.6% through June but will likely not be able to match year-ago production in the remainder of the year. Pork producers need strong prices to continue with today’s cost of production. We could likely get some help from continued food price inflation and further recovery in the economy, helping the bottom line. Competing proteins are very dynamic with beef production and available supply sharply higher and poultry production and available supply lower.