MARKET ANALYSIS

US AGRIFOOD MARKETS BEGIN CAREFUL COVID-19 RECOVERY

The U.S. animal protein, dairy and grains industries have begun to see some recovery from the coronavirus (COVID-19) pandemic, according to a report from financial services firm CoBank. Analysts said a delicate recovery is underway, but more challenges remain ahead.

Grains and crops

China has begun to buy record amounts of U.S. grain during the past three months, including two record one-day purchases of corn: 1.8 million metric tons on July 14 and 1.9 million metric tons on July 30. China has also ramped up purchases of U.S. soybeans as well as sorghum. Despite strong storms that swept through the Midwest in August and ruined 550,000 acres of corn and caused more than US$$300 million in property damage to grain elevators in Iowa, the U.S. Department of Agriculture estimates the harvested acres for corn will rise by 3% and soybeans will rise by 11%. Wheat harvested acreage is expected to fall 1%.

Beef

The U.S. beef sector came out of the third quarter in much better shape than it started, with beef and cattle prices rising due to strong domestic demand. Uncertainties in foodservice demand during the upcoming colder months could test beef demand and pricing.

Beef processing plant capacity has a small cushion, and keeping plants operational is “critical to ensuring a strong end to a very challenging and volatile year,” the report said.

Chicken

U.S. chicken production declined by 3% in the third quarter, but most producers saw modest profits throughout the summer.

Chicken is performing better than the other animal proteins in the foodservice sector, due to successes in quick-serve restaurants and take-out service. Some fast food outlets are even seeing sales growth compared with last year.

“Poultry has tended to fare better during economic downturns and I think this has been and will be especially true for 2020 and 2021,” Will Sawyer, lead economist, animal protein at CoBank said. “With U.S. beef plants having experienced the supply shock of plant shutdowns in the spring and the cattle herd beginning a modest contraction, poultry’s continued supply and economical price point will put it in a favorable position.”

Dairy

Foodservice demand for dairy products remains weak, even as milk production is reaching new highs, the report said. The holiday season consumption is uncertain as social distancing measures may alter the usual holiday gatherings.

At-home milk consumption has risen, but the closure of many schools means demand for fluid milk is still struggling.

The report noted that a new cheese plant slated to open in Michigan during the fourth quarter will take 8 million pounds per day of milk off the market but will add to cheese supplies.