DENVER –The increase in foodservice demand during the summer months strengthened certain segments of the meat and poultry industry. However, according to a new report from CoBank, the effect of inflation in the market will test customers’ desire for meat in the fourth quarter.

Inadequate labor availability remains an issue and is reducing productivity throughout the industry, CoBank noted in the report. These issues will result in supply chain challenges well into next year.

“Supply chain snarls are likely to persist well into 2022, and so will elevated inflation,” said Dan Kowalski, vice president of CoBank’s Knowledge Exchange division. “The latest producer price index data for August was up 20% year-over-year, while the consumer price index increased just 5.2%. So it’s clear that many businesses are passing only a small portion of those cost increases on to the final consumer. We expect that will change in the months ahead and many businesses will raise prices.”

On a positive note, foreign demand for US protein remains elevated with US exports of beef, pork and chicken on pace to reach record highs this year and represent a 3% increase over 2020.

CoBank stated that the strong consumer demand for chicken breast meat and wings along with improved export demand have resulted in a persistent low ending stock of meat. The report stated that freezer inventories of broiler meat at the end of August were down 3% from July and 20% below 2020. 

Additionally, hatchability remains a major constraint to chicken production growth. Weekly incubation rates have been reported at 3-5% higher than a year ago, yet slaughter is down 1% from last year.

The US beef industry remains a strong beneficiary of the domestic and foreign demands. US beef exports are on pace for record levels in 2021 with Korean exports up 17% through July and China up 137% compared to 2020. Per-head packer margins continue to stay at historic highs. For August, the choice boxed beef cutout valuation averaged $322/cwt, up nearly 50% from the previous year.

With the possibility of African swine fever moving closer to countries around the United States, the pork sector is hoping to keep the disease at bay. 

Currently pork prices and hog values are staying favorable due to tight supplies around the world. Pork cutout prices are up 60% from 2020 and are 40% higher than the five-year average. Nearby hog futures eclipsed $120/cwt for the first time since 2015.