Protein production in the traditional sense; pork, beef, chicken, and eggs, is about to face some significant supply chain challenges nationally.
Stocking up on protein now could save you a considerable amount of money 6 months down the road. However, it may take more than stocking up, because the market will not return to normal for the foreseeable future.
Egg and Chicken Production
As you all know there is a new and highly unusual strain of bird flu. Normally bird flu arrises with spring migration and then dies offa few months down the road.
The 2021/2022 winter carried with it a strain of bird flu that was extremely contagious and deadly. The strain did not go away as we entered the summer months and has began to spread rapidly this winter.
In 2022 the USDA did less than they did to manage the flew in 2015. During the 2015 outbreak we lost 50 Million birds in the USA. In 2022 we lost 60 million birds with estimates of over 150 million globally.
According to Food and Safety News, this month AFIS is taking public comments for an EIS Environmental Impact Study. This report will likely be provided to the USDA for guidance on how to handle the bird flu this spring.
We should be expecting restrictions on interstate movement of birds. This will impact both commercial poultry and backyard flocks. If you are a backyard grower of poultry, you should consider growing your flock now instead of waiting for the warmer weather of the spring.
The bird flu has already had a tremendous impact on egg production.
In a recent video Yanasa TV host, Charlie Rankin, spoke about the egg farm fire in Connecticut and the feed related issues impacting chickens laying eggs.
Many viewers had concerns over the lack of amino acids in feed. Amino Acids are a critical supplement for animal feed and performance they help create proteins and eggs.
This problem actually began back in 2021 with supply chain issues. Although not from what you might think.
The African Swine Fever (ASF) decimated the China hog population, leaving China amino acid producers with a surplus in amino acids. This surplus flooded the US market driving prices down putting US producers out of business or at least reducing capacity against demand.
In 2022 China implemented wide spread lockdowns to combat COVID while also working diligently to rebuild their domestic Hog Population (requiring more feed). As a result of China lockdowns combined with an increase for domestic feed in China, amino acids stopped flowing west.
This created a gap within the the supply chain likely hitting in early fall of 2022.
Prices for amino acids remain elevated. Commercial feed is simply out stripping the supply from cheaper consumer feed brands. The good news is that as bugs and other nutrient rich resources return in the spring, you should see more productivity from your birds.
While the amino acid market appears to be performing better from temporary disruptions, it’s critical to note that our dependance on China for amino acids could become a threat in the near term.
Recently a 4 star general ordered commanders under him to prepare their troops for war with China. This is a conflict that could last for years and likely escalate conflict in Ukraine.
If this happens our supplies for amino acids would need to shift entirely back to the United States. This will ultimately drive up the cost of amino acids in feed and once again cause a supply bottleneck that could last for years.
Amino acids don’t just impact egg laying, they impact bird growth and animal growth in general.
To add to feed short falls, corn, which is a major ingredient for animal feed as well as many human foods had it's worst year of harvested acres since 2008.
Both chicken and eggs will likely face heavy casualties in 2023 due to the ongoing bird Flu pandemic. The extent to which farmers will continue to be able to produce and stay in business over the next year will determine how long the shortages extend. We’ll likely see a fall in production that will last for years before the national flock is restored.
Beef Production
There are several numbers with beef production that can help us predict the future supply of beef and what will happen in the market in the near and long term.
Spoiler, it’s bad for consumers, great for the ranchers who can make it through.
4 years of drought have caused 4 years of contraction in the national herd size. Analysts expect that we are still in herd reduction mode and will continue to see a drop of 1 to 2 million head per year through 2025.
2022 saw a dramatic decline in herd size in many key producing cattle states. The drop in herd size translates to what we refer to as culling. Which means the cattle are being sent to slaughter and served in a grocery store near you.
Despite inflation in 2022, beef supplies actually flooded the market. Cold storage grew and the abundance of meat actually put pressure on the prices in the grocery stores.
Hard to believe, I know, since we all paid more. Just imagine where prices would have gone without the surplus.
Can’t imagine it? No worries because it’s heading there now.
In recent reports Cattle on feed dropped 3%. A 3% drop indicates that immediate supply of beef will be tightening. Although 3% doesn’t seem horrible.
Cattle placed on feed dropped 8% after 19% the month before. This means that the near future of beef supply will be falling even more. These are the cattle being placed for finishing. Cattle on feed is at the lowest levels we have seen since 2012.
Those numbers represent a near term supply glut, they aren’t that scary, and they down’t explain why beef production is going to tumble in the years ahead. However, this next statistic does.
The national heifer herd for cattle replacement dropped to the lowest level since 1962 according to Bloomberg.
This is a big deal.
Heifers accounted for over 39% of fed cattle slaughter in 2022—the highest since 2003—and heifers represented 39.7% of cattle on feed in late 2022—the highest since 2001.
USDA-reported feeder cattle and calf sales from January to June 2022, heifer feeder cattle and calves made up 40.7% of all sales, followed by 38.3% in the third quarter and 39.7% in the fourth quarter.
What this means is that once the cattle cycle turns, which it likely will not for at least a year or two. It will take at least two years just to rebuild the Cow Calf operations that provide feeder cattle.
There are multiple head winds to this cattle cycle that will cause a longer term supply glut and extremely high prices for consumer burgers.
The Biden Administration has plans to add to these woes for farmers.
At a time when we should be concerned about US Food Security and independent production, tthe White House is redefining navigable water laws to restrict farm land activity.
The administration recently revised upland waters protected by the US Federal Government to literally include every stream and irrigation ditch in the country. The laws restrict not only water rights for farmers and ranchers but significantly reduce farmable land. Thus adding to the cost of land.
The new laws are an extreme over reach of the US Government to control farm land beyond what is necessary to protect the environment.
The current administration isn’t stopping with water regulations. The EPA recently announced that due to the pressure of lawsuits filed by environmental protection groups, funded by the alternative protein industry, they will be running an investigative study on environmental impacts of CAFO’s on water to establish new guidelines (regulations) on CAFO’s going forward.
Under the administrations new definition of protected waters the results of the investigation into CAFOs should be very interesting.
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