OECD-FAO projects a rebound in protein prices for the next decade
The 2017 OECD-FAO agricultural outlook projects global growth in the production, consumption and trade of meat. A caveat: the meat industry won’t grow at the same rate seen in the last 10 years. But even with that slowing growth, the fundamentals of supply and demand look to be sound until 2026.
Their overall growth projections to 2026 (relative to the base period 2014-2016) include:
- A 13% increase in global meat production
- A trend upward in per capita global meat consumption over the outlook period – but only marginally. The income growth in emerging markets that drove so much of the last decade’s growth, is expected to slow.
- Annual growth of nearly 1.5% in global meat consumption. The continuing high population growth rates in much of the developing world account for that growth.
Here’s what you can expect for farm prices in the poultry, pork, beef and dairy sectors:
1. Stable U.S. farm poultry prices as global demand continues to grow - especially in the developing world, where it’s relatively low-cost to produce, and buy (Figure 1). Poultry is poised to be the star in the next decade: of all meats, it will see the largest portion of new growth in demand, trade and production.
2. Pork profitability remains positive – given low costs of feed grains in the outlook period. The U.S. average farm price is likely to dip in 2017, then increase thereafter. Pork production will increase globally, driven most notably by China’s herd expansion, likely rising as demand also rises. Canadian exports will grow to meet some of that new demand.
3. Fed steer prices higher than 2016-ending prices. Global beef production continues to pick up, with higher carcass weights and cattle herd expansion driving up the supply of beef. Per capita consumption in Canada continues to grow.
4. Dairy sector to benefit from strong consumer preference for dairy fat. The price projection for U.S. skim milk powder (SMP) stands out – a 76% increase over the next ten years. That’s good news for Canadian producers who saw the Canadian price of milk trend lower between 2014 and 2017, partly because of large SMP supplies and fading demand. The recovery is conditional on a rebound in the demand for SMP from China.
Competition to supply proteins is fierce
With feed grains projected to be priced low for the next 10 years and strong global meat demand, the livestock sector will see some profit upside. But Canada’s competition is also picking up. Brazil and the U.S. will dominate growth in meat exports to 2026; developing countries will also take an increasing share of overall exports. Canadian producers can increase their market share by investing in quality and innovation to meet new consumer demands.
J.P. is the Vice-President and Chief Agricultural Economist at Farm Credit Canada. Prior to joining FCC in 2010, J.P. was a professor of agricultural economics at North Carolina State University and Laval University. He also held the Canada Research Chair in Agri-Industries and International Trade at Laval. J.P. is Past-President of the Canadian Agricultural Economics Society. He obtained his Ph.D. in economics from Iowa State University in 1999.