Cobank Forecasts Mild US Recession Protein Slowdown

Cobank Forecasts Mild U.S. Recession, Protein Slowdown

by Susan Kelly, meatingplace.com

CoBank is predicting the U.S. will enter a brief recession next year, with consumer spending likely to slow on an uptick in the unemployment rate to as high as five percent.

“As financial conditions continue to tighten, we expect the U.S. economy will steadily soften through the first half of 2023, ushering in a brief, modest recession,” said Dan Kowalski, CoBank vice president, in a new report. “Without this softening in the labor market and the associated slowing of wage gains and spending, it will be difficult to stabilize prices.”

U.S. businesses, which have enjoyed record profit margins despite high inflation, may be reluctant to lay off workers after experiencing extreme staffing shortages over the past two years, the bank said. This could cushion the economy from the worst of a downturn in 2023.

In the agriculture sector, farm income and margins are likely to tighten as skyrocketing production costs, steeply higher interest rates and weakening demand take a toll. The ongoing drought and China’s efforts to minimize its dependence on U.S. imports add to the downside risk, according to the outlook.

In addition, a divided government reflecting unique midterm election results will muddy the path of the next farm bill, the bank said.

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Protein production to moderate

CoBank expects slower U.S. animal protein production following a “phenomenal financial performance” in most industry segments over the past three years. “This era of broad profitability will likely come to an end in 2023,” the report said, as the high costs of feed, labor and construction support a cautionary attitude.

Animal feed demand is softening, reflecting flat overall growth in the domestic livestock sector, the report noted. On the demand side, consumers are reeling from rapidly declining real wages, a trend that’s likely to continue well into 2023, CoBank said.

“After reaching an all-time high of more than 226 pounds per capita (projected) in 2022, we expect U.S. meat and poultry consumption to be flat at best in 2023, with marginal gains in chicken and pork offsetting a decline in beef,” the CoBank analysts said.

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Beef contraction

After eight years of growth, red meat production, especially beef, is set for a substantial contraction during 2023, down 2 billion pounds year over year, due to shrinking cattle supplies, the report projected. The

Phone: 806-655-3033 • 325-554-7434 decline reflects an estimated 5 percent annual reduction in total beef cow inventory and comes at a time when beef still has a tailwind of support from consumers. As a result, prices will remain historically strong, in both live cattle and beef markets.Phone: 806-655-3033 • 325-554-7434 Cell: 806-683-4613 • steve@expressscale.com www.expressscale.com Phone: 806-655-3033 • 325-554-7434

While pork production is set for a moderate rebound in 2023, the hog breeding herd Cell: 806-683-4613 • steve@expressscale.comCell: 806-683-4613 • steve@expressscale.com www.expressscale.comPhone: 806-655-3033 • 325-554-7434 Cell: 806-683-4613 • steve@expressscale.com www.expressscale.com is at a five-year low, down 6.5 percent from the peak in 2020, suggesting minimal potential for supply growth. To partially offset the www.expressscale.com gap in red meat production, the U.S. may rely more on imports in the coming year, CoBank said. ▫