Economists Richard Brock, owner and president of Brock Associates Inc., and Steve Meyer, lead economist at Partners for Production Agriculture, spoke at the 2024 American Feed Industry Association’s Purchasing and Ingredient Suppliers Conference on March 14 in San Antonio.
Here are some of the main takeaways from their presentations on the grain and animal protein markets:
1. Brazil’s place in the global chicken market
“Brazil is a juggernaut, and they are a juggernaut on many fronts,” Meyer said. U.S. broiler exports “are not growing at all; exports out of Brazil are growing pretty steadily.”
“The U.S. still dominates global chicken supply,” he added. “We’re still the biggest game in town but the fastest growing one of the major suppliers is Brazil.”
2. The economy’s effect on meat demand
“I think the economy is going to stay good and support demand as we go forward,” Meyer said.
Beef ran into demand difficulties a year and a half ago, pork ran into some demand difficulties about a year ago, and chicken ran into demand difficulties last summer, he said.
“Does that surprise anybody? If you think that incomes were what were driving demand in the first place, the most expensive one runs into the demand challenges first, the next most expensive next and the cheapest one as the last one,” Meyer said. “But still, if we put them together, they’re up 4% for January. … All three of these are at or above their five-year averages. And so I think we’ve got a pretty decent situation for demand as we go through ’24 and into ’25.”
3. Hog market supply and demand
In the hog market, Meyer said, “There’s only three years ever that we had better hog prices than we had last year, but the losses were still massive because of those costs of production. … Costs are going lower and we think they might go lower still. Demand has improved, especially at the wholesale level, since July.”
U.S. pork exports grew in 2023 and consumer demand has recovered as well. Additionally, herd health has improved.
“That’s really good for the operations that the health is better. It’s not so good for the market, because that means more pigs live,” Meyer said.
Hog weights are expected to be about 1 pound higher than last year, and cutout values are much improved from last year due to higher wholesale demand.
4. Driving force behind big shift in corn exports
“The underlying force here is what’s happened to the evolution of the seed companies,” Brock said. “Twelve years ago, almost all of the major seed businesses were U.S. owned. The only people with access to our genetics was U.S. farmers. … Syngenta sold out several years ago to ChemChina. And, of course, Monsanto sold out to Bayer China and Germany. Now every farmer in the world has access to the same genetics a corn farmer in Illinois has.”
In 1994-95, the U.S. had 83% of the world’s corn export market; it now has 26.9%, Brock said.
“All of a sudden, worldwide corn production has skyrocketed. And, as a result, we’ve lost a big part of the corn export share,” he said.
5. Wars’ effect on the economy
“I think a lot of people are underestimating the impact of the wars that are taking place right now in Gaza and in Ukraine,” Brock said. “Wars are bullish to the stock market. They pump a lot of money into economies. … There are a lot of companies doing very well in this kind of market that are kind of under the radar and we just don’t see what they’re doing. But everybody wants to talk about what’s going on the stock market economy.”
6. Interest rates
“Everybody in this room is impacted by the interest rates because of the inventories you carry,” Brock said.
While many people think interest rates will start to come down soon, Brock doesn’t agree.
“I think interest rates are just going to flatten off,” he said. “We’re stuck up here around this 5%. My personal opinion is I hope it stays here where it is right now. I think it’s at a level where most of our businesses, we can figure out how to make things work in his 5% to 7% range.”
