WACO, Texas (KWTX) The United States Department of Agriculture in June reported the second largest surplus of meat in history after foreign markets crumbled because of tariffs, which in the long run could mean lower meat prices for U.S. consumers.
But what promises to be good for consumers could also spell disaster for local poultry, pork and beef producers as market prices plummet.
"Dang, that's a lot of meat," says Dr. David Anderson, professor of agricultural economics in Department of Agricultural Economics at Texas A&M University said Tuesday.
At least, it sounds like a lot of meat, but not so fast, there, cowboy, Anderson says.
"We store hundreds of tons of meat in the U.S. all the time because once it's butchered, meat has to be kept cold. That's nothing new," he said.
Perhaps current stores of beef don't show an alarming trend, but U.S. freezers show significant upticks in stores of pork and poultry, he said.
Soon that could mean lower prices at the meat counter, but the fly in the ointment is that if consumer prices decline, producer prices will decline right along with them, so the positive effect at the supermarket will equal a negative effect at the auction barn.
U.S. consumers' appetite for meat is growing, but not fast enough to keep up with record production of hogs and chickens.
The USDA reported Monday that 2.5 billion pounds of meat is stored in commercial freezers in the United States, the second largest surplus in history.
"We are packed full," Joe Rumsey, president of Zero Mountain Inc. said.
The company, based in Arkansas, currently operates five cold storage locations that provide a total of more than 330,000-square-feet of freezer and storage space for turkeys and chicken strips between processors and retailers and on any given day holds 250 million pounds of product awaiting shipment.
Zero Mountain is building a sixth warehouse in Waco.
"It's an example of how important exports are to U.S. agriculture." Gene Hall, communications director for the Waco-based Texas Farm Bureau, said Tuesday.
"Also of how tariffs can affect markets," and "If additional markets are not found, (consumer) prices will decline," Hall said.
"That will be of short term benefit for consumers. However, if it's serious enough and (livestock) producers go out of the business entirely, that could have serious long term effects," Hall said.
Federal data released Monday showed a record level of beef, pork, poultry and turkey being stockpiled in U.S. facilities, rising above 2.5 billion pounds, USDA and other agricultural analysts said.
"U.S. consumers' appetite for meat is growing, but not fast enough to keep up with record production of hogs and chickens," a Sunday report published in the Wall Street Journal said.
The WSJ article continued: "That leaves the U.S. meat industry increasingly reliant on exports, but Mexico and China—among the largest foreign buyers of U.S. meat—have both set tariffs on U.S. pork products in response to U.S. tariffs on steel, aluminum and other goods.
"U.S. hams, chops and livers have become sharply more expensive in those markets, which is starting to slow sales, industry officials said," according to the WSJ story.
China first implemented a 25 percent tariff on U.S. pork in April and in July boosted the duty to 62 percent, and that resulted in an 18 percent decline in meat exports to China in the first five months of the year.
In recent weeks USDA has reported no sales of pork to China.
The top importer for U.S. pork is Mexico, where in June officials imposed a 10 percent tariff on U.S. meat imports and grew that to 20 percent this month.
"While overall exports to Mexico have been running slightly ahead of last year's total, new weekly export sales reported for the week of July 5 came in at their lowest level this year, the USDA said," according to the WSJ.
"In the market for pork the impact is most significant right now because there's a lot of it stored and it’s got to go somewhere so shoppers are going to see some great deals on pork very soon while beef prices may rise, so that's good for the pork market," Anderson said, "and for consumers doing the shopping."
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.
Anderson said current stocks of pork are running about the same as last year, slightly behind, but poultry right now is stored adequate for the next five years.
The truth is, and it's always been, whatever effects livestock production around here effects everybody, sooner or later everywhere.
Livestock is bred and raised here, hauled into and out of here, fed out and auctioned here, shipped to slaughter houses, slaughtered, butchered and packaged here and sold to purveyors around the world and lots of it ends up at local supermarkets.
Central Texas, like it or not and for all of its other bright spots, is livestock country and that's not likely to change anytime soon.
Anderson says the ripple effect nationwide caused by an event like this sometimes knows no end.
"China was our largest importer of soy beans and soybean meal and had been for years," he said.
"Tariffs have made export of U.S. soybean and soybean products to China unaffordable in that market and soybean farmers in the Midwest are devastated, but for us, livestock producers, it means all those soybean products are being used as livestock feed and now there's so much of it feed prices have gone way down, so production costs have dropped," he said.
"It's good for shoppers, it's good for the livestock industry but it's killing soybean farmers."