Rebound for U.S. livestock industry may depend on demand for protein from developing countries

The recession has wounded milk and hog producers, and hurt the cattle industry, but the traditional supply adjustment should boost profit margins and hold off larger losses over the next year. "Renewed prosperity in the livestock industry, however, hinges on a rebound in protein demand," Brian C. Briggeman and Jason Henderson report for The Main Street Economist, a publication of the Federal Reserve Bank of Kansas City. (FRB chart)

Protein demand traditionally remains sluggish after a recession, Briggeman and Henderson report; they point to developing countries to provide demand as their income rises. "An emerging middle-class in developing countries is rapidly increasing its protein consumption, offering new opportunities in global markets," Briggeman and Henderson write. "The prospects of a rebound in U.S. demand appear bleak, especially if the recovery is not strong enough to spur rising employment, incomes and spending."

Briggeman and Henderson acknowledge that competing in global markets can be a difficult task for U.S. livestock producers facing higher prices at home, but say that if their products target global consumers' tastes livestock producers can still penetrate global markets. "In short, for U.S. producers to seize new global opportunities, they must continue to create new products for new consumers," Briggeman and Henderson write. (Read more)