2021 Meat Processing Outlook: Navigating Price Volatility By Kyle Burak, Farm Credit Canada
T
he meat processing sector has experienced its fair share of ups-and-downs over the past couple of years. Global supply reductions have expanded export opportunities while rising incomes supported domestic demand in 2019. COVID-19 shifted consumption away from foodservices, created new opportunities in retail sales and increased processor’s costs. Plant-based proteins have increased competition – however, they still represent a small proportion of overall protein demand.
Sales increasing on strong export demand, but domestic headwinds exist Over half of Canadian beef and 70% of pork is shipped internationally, making exports key for growth. Exports have grown at an average rate of 5.8% between 2015-19, with sales growth averaging 2.7%. Plant shutdowns in 2020 resulted in sales falling 11.8% in April YoY, introducing a significant backlog in livestock. Our October Red Meat Outlook projected livestock prices to remain below the 5-year average into 2021. Export opportunities to China, the U.S. and Vietnam have driven the recovery. Add this up, and exports are up 9.2% YTD, with sales up 2.6% thru September.
Sales are forecast to decrease by 0.4% YoY during the fourth quarter as the second wave of COVID impacts the global foodservice industry, bringing the annual growth rate to 1.8% (Figure 1). The impact of COVID will continue to be felt into 2021 as well. We project sales to decrease by 0.6% for the year, largely due to the abnormally strong Q1 in 2020 and continuing struggles in foodservice. The remainder of 2021 should see more stable growth as the impacts of COVID wane. Figure 1: Meat product manufacturing shipments projected to rebound in 2021
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BlockTalk - Spring 2021
Sources: Statistics Canada and FCC calculations
These forecasts embed lots of uncertainty given the risks to the economy, global trade, and livestock prices related to COVID-19. According to the USDA FAS, Canadian beef and veal exports are predicted to increase by 4.0%, and imports decline by 8.3% in 2021. This could tighten the domestic beef supply and lead to increases in beef consumer prices. This should benefit the demand for chicken and pork. Pork exports are expected to decline by 2.0%, and imports remain flat due to an increasingly competitive global export market.
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