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Consumers See More Meat On Plates When Farmers Respond To Good Prices

Mar 13, 2015

By Scott Brown, University of Missouri economist.

Consumers see more meat on their plates when farmers respond to higher livestock prices.

But with lower prices, meat supplies fell 9 percent from 2007 to 2012. With recent higher prices, farmers bred more animals. The resulting expansion in meat is expecting to reach a peak by 2018, says Scott Brown, University of Missouri economist.

Farmers are driven by the laws of economics and restrained by laws of livestock reproduction cycles.

With favorable prices—even record prices—farmers bred more animals the last couple of years. That brings more food for consumers. The laws work in reverse, as well. As meat supply rises, prices fall.

“Domestic demand strength will be crucial to future prices,” Brown says.

Brown and his associate Daniel Madison cover livestock in MU Agricultural Markets and Policy (AMAP). Their reports are in the 2015 briefing book from AMAP and the MU Food and Agricultural Policy Research Institute (FAPRI).

Consumers benefit from more meat supply. However, that brings lower prices to farmers.

For example, in 2014 wholesale pork peaked at $110 per hundred. By 2018, the projected price is $81. In the same time, wholesale boxed beef goes from $239 to $204.

In 2014, declining meat supply led to a per capita meat consumption of 200 pounds. That includes beef, pork, broilers and turkey. By 2018, consumption should reach 212 pounds before starting another drop.

Meat prices drive livestock cycles, and vice versa. As prices rise, farmers market more animals. While 2015 growth in meat supply is projected to be the fastest since 2002, Brown says, all growth will be in pork and poultry.

Poultry has the shortest reproduction cycles, measured in weeks. Beef cows, with gestation periods of nine months, are slowest, taking years to change.

Beef supply will drop over a half million pounds in 2015, in spite of current high prices. When herd owners hold back more young females, fewer calves go to feedlots. That cuts beef supplies in the short term.

On dairy farms, record high prices also brought more milk. Producers rushed to add 100,000 cows to their milking herds in 2014. At the same time, low-cost grains allowed them to boost milk yield per cow.

“Milk production growth was the highest since 2005,” Brown says.

That is causing a sharp drop in milk prices in 2015. While milk prices reached $24 per hundredweight in 2014, price projections for this year fall below $18. More cows are still entering milking herds.

The baseline shows grocery buyers will see lower prices. The consumer price index (CPI) increased by 2.1 percent in 2014. For meat, that increase was 7.2 percent.

With more meat arriving, the food CPI for 2015 is expected to grow only 1.6 percent. Those prices can fall more, as there is a time lag in low commodity prices reaching retail levels.

The MU FAPRI annual baseline projections guide farmers in production plans. It also serves legislators and government policymakers.


Source:missouri.edu