I was hanging around some beef guys last week and I have to say, it was a great time. The people involved in animal production in this country (and around the world that I have traveled) are some of the most genuine, thoughtful, fun-loving and creative human beings I have ever met. A lot of them are suffering now of course both financially and psychically as they face the daunting uncertainty of low prices and record input costs.
One of the guys I was talking to reacted genuinely surprised and intrigued when I shared with him the inevitability of his business shrinking over the next 10 years. I told him he had to read a little bit wider than his trade magazines if he wanted to see the future more clearly.
Troy Marshall writing for the beef industry is starting to get it when he says, "The real change in our industry is being driven by negotiations between governments, public perception, consumer movements and political motivations."
: http://beefmagazine.com/cowcalfweekly/werent-wrong-looked-at-wrong-things/
If you line up the challenges coming to the meat complex over the next several years, it is hard to imagine that even the compelling need to produce more meat for the coming world demand will be able to overcome them.
Global demand will not be the early problem, although it seems very likely to shift around a bit. For instance, the areas of global growth are not in the developed nations coupled with the fact that as the U.S. and the EU passes its baby boom generation into the geriatric phase, high living won't mean a great steak or rack or ribs anymore, rather a very nice bottle of red wine and a sunset view over some exotic landscape.
The first wave of meat complex shrinkage is coming from what can only be called "taxes" placed on the production side from a growing list of poltical demands (I hestitate to call them societal demands yet). The first one arises from the decision to place an "extra-market" mandate on one-third of the U.S. corn crop for non-food uses, but it is only the beginning of the coming "taxes".
These taxes largely wind up on the consumer but not before they pass through the more narrow channel of the meat and ag complex where massive wealth transfers are already underway. The question everyone who doesn't have a vested interest in ethanol seems to be asking is whether or not this tax is producing much net benefit. So far, there remains bi-partisan support.
Taxes which raise the cost of production lead to less production at any given price level. Higher prices, once the pass-through begins, will lead to less quantity demanded. Add to that the gradual loss of baby-boom demand, a protracted period of economic malaise which seems very likely to go global, uncertainty rising and almost certainly higher taxes on everything and you have the beginning of the reasons to believe the meat complex is set up for a pretty fair shrinking.
These things however are just the tip of the iceberg.
