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CME: Pork & Beef Demand up, Chicken Down in 2011

16 February 2012, at 2:07pm

US - The release on Monday of USDA's estimates of carcass/ ready-to-cook weight data for December exports provided the last piece of information needed to compute demand indexes for December and all of 2011, write Steve Meyer and Len Steiner.

The top chart shows the indexes since 1970 for the three largest animal protein species. Pork and beef demand were up slightly (0.9% and 1%, respectively) in 2011 from their levels of 2010. Chicken demand ended the year down 0.7%, the fifth time in the past six years that the chicken demand index has declined since peaking at 146.2 in 2005. Remember that demand is not merely consumption.

These indexes use per capita domestic consumption and average real retail prices to compute an index relative to the base period, 1985, that represents the position of a downward sloping demand curve in the traditional Q-P space of a supply-demand diagram. A positive index change means the demand curve has moved up and to the right in that space. A negative change is just the opposite. The index value for a given year represents the position of the demand curve during that year relative to its position in 1985, the base year.

Indexes for all three species ended 2010 on a roll as the economy recovered and spending at both grocery stores and restaurants rebounded from the depressed levels of 2008 and 2009. That momentum continued into 2011 for both chicken and pork but slowed some in the first half of the year for beef. An improving economy in late 2011 appears to have positively impacted beef demand with the last five months (and seven of the last nine months) seeing year-onyear increases in the monthly indexes. Pork demand, though, struggled from August through November with monthly index figures as much as 5% below those of 2010. That all ended in December when the year-on-year comparison flipped to a positive 5%.

As can be seen above, chicken demand is still struggling mightily with all year-on-year comparisons since September 5% or more below the 2010 level. Reductions in per capita product offerings have been accompanied by LOWER, not higher, retail prices. Some of this may be due to the prevalence of long-term pricing agreements in the broiler sector and the time lags they cause for price responses. But it would be good to see some response - soon - to lower supplies.

Following up on our discussion of sow gestation stalls in yesterday's DLR there is one other system that is gaining in popularity in the U.S. 'Free-access' systems are a hybrid of stalled housing and group housing that give sows a choice of staying in a stall or moving around a group area. The stalls are equipped with gates that close behind sows when they enter and open whenever they want to leave. The closed gate protects the sow in the stall from being bothered by other sows. All feeding occurs in the stalls. Water is available in the stalls as well, allowing them to be locked shut to allow managers to observe sows, treat sick or injured sows, remove individuals who may need attention or even confine individual animals for short periods of time. The stalls themselves are roughly the same size, 2 feet by 7 feet, as fixed stalls but they do require more space since there is usually an 8-10 foot alley behind two rows of stalls. Assuming an 8-foot alley, this system would require 2 feet by 11 feet per sow or over 50% more floor space. Interestingly, sows spend most of their time in the stalls since they are protected there and can lay without being bothered. Virtually all sows do leave the stalls from time to time.

This system, like the others, has trade-offs. Gaining the mobility of group housing and the benefits of that mobility (muscle tone, joint flexibility, presumably less foot lesions, 'happy' sows, etc.) requires more floor space and equipment with a good number of moving parts. Mixing moving parts and 400-600 pounds sows is almost always a maintenance nightmare unless the equipment is very well built. This system would have the potential, like strictly group-housed systems, of more fighting and consequent injuries but providing the safety of a stall would mitigate the number and severity of those injuries. Producers who we know to have installed these systems are generally very satisfied with them even though they are more costly.