US livestock sector in poor shape

Aug. 1, 2009 - PRLog -- In BMI's US Agribusiness Report for Q3 2009 we begin to look at the outlook for the 2010 harvest. Next year we expect production of grain to fall back from the high levels estimated for 2009. This year a bumper wheat crop in the US and its northern neighbour Canada has put pressure on prices. Prices were already suffering from flagging demand owing to the poor state of the livestock industry in the two countries and sluggish demand on the export market. In 2010, we expect only a small recovery in prices despite a forecast large fall in production on both sides of the border. US soybean producers have been seeing far better fortunes so far in 2009. A devastating drought in the southern end of South America has seen harvests drop sharply in the US's main competitors on the export market, Brazil and Argentina.

This has sent prices of soybeans back up after the fall through the second half of 2008. By June 2009, exports of soybeans for the market year (September 2008-August 2009) were already around 3mn tonnes higher than the level seen at the same time last year. Despite an estimated 10.6% year-on-year (y-o-y) rise in production in 2009, the increased demand has caused stocks to fall to record low levels. This will further support prices through the remainder of the year. The real driver behind the growth in US soybean exports is China. By June 2009, US soybean exports to China for the year had already reached 17.12mn tonnes, up from 12.00mn at the same period last year. Rapid growth in China is allowing the country's massive population to spend more on higher value foods such as meat. The expansion of China's livestock industry as well as growing demand for edible oils is leading the country's soybean consumption to climb ever higher.

In future years once harvests in South American producers return to more normal levels US exports will have increased competition. However, China's insatiable demand for the beans will see US production continue to rise in coming years. The US's own livestock sector is still looking in poor shape. Producers have continued to draw down the size of their herds. We forecast falls in production of beef, pork and poultry this year. An expected recovery in hog prices in April and May was subdued by the outbreak of H1N1 'swine flu' temporarily denting demand for pork. Demand for all meat is being hit by the poor economic conditions - BMI is now forecasting the US economy to contract 3.3% this year. Feed costs, while down from the highs of 2008, are still high on a historical basis. Dairy farmers have also been cutting their herds as dairy prices have stayed low. It will take some years before cattle herds can be built back up and we forecast output of both beef and milk to fall again in 2010.

http://www.companiesandmarkets.com/r.ashx?id=PU77WO4PE149255

# # #

Browse thousands of market research reports covering major markets, companies and countries. Www.companiesandmarkets.com is a central source of market research reports from the world’s leading analysts and report publishers.