More than 2.5 billion pounds of meat and poultry produced by US farmers have been stockpiled in cold-storage warehouses with the amount expected to grow further, according to the latest federal data.
Record production of beef, pork, poultry and turkey has become increasingly dependent on exports as US consumers cannot buy up the huge amount of meat.
That would drive down prices for American consumers, restaurants and retailers. However, the recent import tariffs imposed by the country’s trade partners on the wide range of US goods, including agricultural produce, have slowed down sales of US meat and poultry abroad.
Earlier this year, China and Mexico, the largest foreign buyers of US meat, taxed American pork products in response to the tariffs imposed by the White House on steel, aluminum and some other goods. The measure made prices for US hams, chops and livers in those markets shoot upwards, reports Wall Street Journal.
“We’ve got too much capacity built in this industry if we’re not going to be exporting more product,” Ken Maschhoff, the chairman of Illinois-based hog-farming company Maschhoffs, told the media.
The businessman stresses that the company was considering expansion into less “geopolitically charged” regions, such as Eastern Europe or South America. The US Department of Agriculture expects the US meat industry to produce a record 102.7 billion pounds of meat in 2018.
Plunging exports along with increasing domestic stockpiles puts at risk profits for the US meat processors as well as prices for livestock and poultry producers. Lean hog futures at the Chicago Mercantile Exchange have reportedly dropped 14 percent since the end of May.
Trade risks and increasing meat supplies may lead to “one of the biggest corrections we’ve seen in the industry in several years,” said Christine McCracken, protein analyst at Rabobank, as quoted by the media.
The Trump administration recognizes the financial hardship livestock producers could face as a result of retaliatory tariffs, and farm country will be better off under new trade deals the administration is pursuing, USDA Secretary Sonny Perdue has said.
The USDA has examined drawing upon Depression-era programs that permit borrowing of as much as $30 billion from the Treasury as a way to compensate farmers for tariff-driven price declines, and Mr. Perdue has said he aims to have a plan ready by this fall.
For cold-storage warehouse operators, the growing meat stockpile creates opportunities. In Sioux City, Iowa, Cloverleaf Cold Storage Co. has been upgrading its technology to help track the location of individual pallets in its 18 warehouses, which co-owner Adam Feiges said has helped the company run its warehouses at 90% capacity, compared with 85% in the past.
Netherlands-based NewCold, which specializes in automating the handling of frozen and refrigerated foods, opened a facility in Tacoma, Wash., this year.
“There is a general lack of cold-storage capacity,” said Jonas Swarttouw, NewCold’s U.S. manager. The company is building another facility for Idaho and is talking to various meat producers about adding more room.
Zero Mountain Inc.’s Fort Smith, Ark., warehouse is filled to the brink this summer, with pallets of frozen meat rising near the 40-foot-high ceilings on towering metal shelves. It is building a new facility in Waco, Texas, and has raised wages for forklift drivers with a gift for stacking and moving tons of frozen meat.
“This summer’s going to be increased volumes, and if we want to capitalize on those, we have to do everything in our power to maximize our cubic footprint,” Mr. Rumsey said.
Mr Americana, Overpasses News Desk
July 23rd, 2018