Farmers are harvesting a record corn and soybean crop this year causing the price of grain commodities to tumble, which is great news for livestock producers and people who love bacon.
Since 2007, livestock producers have been hit by one market shock after another. First there was the Great Recession. Then the drought in 2012. Over the past year, hog producers across the country lost 4 percent of their litters to the porcine epidemic diarrhea virus (PEDv). And on top of it all, feed prices have soared.
Chris Hurt, agriculture economist at Purdue University, said all of these factors came together to cause a shortage in the meat supply. In 2007, there was enough meat in the country for each American to eat 220 pounds of it a year. Over the past seven years, it’s dropped to 199 pounds per person. Hurt broke it down into beef, pork, and poultry.
Available Meat Supply
Beef 65lbs. 54lbs.
Pork 51lbs. 46lbs.
Poultry 74.3lbs. 70.8lbs.
When people hear there's a meat shortage, they might expect to go to the grocery store and find the freezers bare. But Hurt said that's not how it works. Less meat doesn't mean no meat, it means meat that's a lot more expensive. For example, the average price for a pound of beef in 2007 was $4.16. In August, 2014, it was up more than $2 to $6.24 a pound.
Higher prices cause consumers to change their eating habits. They go from buying a higher end steak, Hurt said, to "a lower value steak or hamburger, or other cuts like pork or even over to chicken."
This year’s record corn and soybean harvest, however, has Hurt feeling optimistic for the future of livestock producers and meat eaters alike.
"We're going to begin to turn the corner," Hurt said, referring to this year’s falling feed prices. The price of soybeans is expected to drop somewhere between $9 and $11 per bushel, the lowest price in 5 years, and corn is expected to reach somewhere between $3.10 and $3.70 per bushel, according to the USDA's most recent predictions, compared to $4.61 last year.
Cheaper feed is encouraging livestock producers to begin breeding their animals again and expanding their herds. Iowa hog farmers, for example, have increased their breeding herds - the sows and boars that make the piglets - by 3% or 30,000 head over the last year. Hurt expects herd expansion to happen across all sectors of the market, from cattle to pork to poultry.
But each animal produces at a different rate. In cattle, for instance, Hurt said, “We're just now starting the expansion, won't be finished till 2018, 2019. Then we have a few more years where beef supplies will still be increasing.”
By comparison, he said, it only takes about 10-12 weeks to grow a new flock of chickens and a few months to increase the supply of pork, so we should see cheaper bacon by the spring.
The question remains, just because there’s more meat on the market, will consumers eat it?
“They'll have some incentives in the form of lower prices, particularly in beef and pork,” Hurt said. “So the answer is yes, we think consumers will come back and eat more.”