According to a recent report from Rabobank, meat consumption by Americans jumped by 5 percent in 2015 alone — faster than any other year over the past four decades. That’s not all: Rabobank expects per-person meat consumption to reach levels not seen since the turn of the millennium.
Last year, the average American ate 193 pounds of a combination of red meat and poultry annually, and report author Will Sawyer, executive director of animal protein research, wrote that protein production will grow 2.5 percent annually through 2018 – down from 3 percent in 2015 – with beef being the largest contributor.
Still, Rabobank foresees industry challenges and a struggle to keep up with that growth.
“By the end of this expansion cycle in late 2018, we expect a more challenging profit environment across the U.S. meat industry, providing strategic opportunities for those producers with the capital and foresight to take advantage of them, “ Sawyer wrote.
He also expects further industry consolidation, noting that the chicken sector in particular has seen very favorable profit margins in recent years. “Any producer considering a possible sale or divestiture should move quickly, as the outlook for margins and valuation isn’t moving in their favor,” he wrote. “And it will likely be more than a few years before industry conditions return to current levels.”
The report notes that consumers likely will be the winners of one of the largest increases in protein supply in U.S. history, with plenty of relief in the form of lower meat prices – especially in beef and pork. With feed costs back to 2009 levels, Sawyer argues that meat prices will trend lower.
“One alleviating factor to this rising tide of meat supply is that most of the decade leading up to 2015 was quite weak for U.S. meat consumption. This was primarily driven by high meat prices relative to consumer incomes and, to a lesser extend, changing preferences,” Sawyer added. “However, the rate of industry expansion may very well be too much too fact, as it is unclear as to whether consumers are willing to exceed the historical high point in consumption seen in 2005.”