Ag economist: Cheaper grains means more competition in protein market

News   31/01/2018 - Nguyễn Trí Tín

The reducing demand for ethanol and cheaper prices of grains will continue to result in more livestock production in the US, Michael Swanson, a senior agriculture economist with Wells Fargo, told attendees at the National Fisheries Institute’s Global Seafood Market Conference on Wednesday morning. 

Translation for the seafood industry: More competition is coming to the protein market.

“To increase your share on the plate, you have to push somebody off of it,” he said.

Swanson made his point with a series of charts and graphics. While increasing corn production has met decreasing demand for its use in energy, US meat production has been climbing steadily. Chicken broiler production in the US is expected to top 19 million metric tons in 2018, up from below 9 million metric tons in 2000. Pork production also has increased, to 11m metric tons from below 5m metric tons in 2000.

It’s more profitable to sell grains to livestock producers and, in the case of excess production, store or ship frozen meat products around the world than to overproduce grains and store them or ship them to other countries at reduced prices.

The animal slaughter business has seen its profits increase since 2011, from a median return on assets of 7% in 2011 to more than 10% ROA in 2017, Swanson noted in his charts. Companies that process and prepare seafood, however, have seen their profit margins stagnate, hovering around 6% ROA from 2010 to 2017.