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Market Overview

Red Meat Production Reaches Record High (SFD, CAG, TSN, ADM, BG)

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In a report from the Economic Research Service, the United States Department of Agriculture has reported that the U.S. red meat production and exports hit record-highs in March and have been steadily increasing since 2007.

The USDA has put together a forecast for livestock imports and exports in 2011. The report states, "U.S. beef exports for 2011 are forecast at 2.43 billion pounds and beef imports are forecast at 2.3 billion pounds, making the U.S. a net exporter of beef again in 2011, and by a larger margin."

Pork exports have increased since last year by 17% and despite increased production early in the year, prices continue to climb year after year. Although higher feed costs contribute to the price, the USDA believes much of the increase stems from increased consumer demand.

Alternative diets like vegetarian and vegan have gained popularity recently, as consumers are becoming more aware of their lifestyle choices. The buzz words have been ‘green', ‘healthy' and ‘eco-friendly,' and while it remains to be seen whether meat or no meat makes a difference, customers enjoy red meat.

The USDA broke it down by quarter, “First-quarter 2011 U.S. beef exports are expected to outpace 2010 by 28 percent, at 610 million pounds. In the second and third quarters of 2011, 9- and 3- percent growth above 2010 levels is anticipated. Exports in the fourth quarter should decline below 2010 levels.”

American red meat producers should continue to reap the benefits from the increase in demand. Pork producer Smithfield Foods (NYSE: SFD) has seen steady growth in the last year and is currently trading at $23.67. Beef producer ConAgra Foods (NYSE: CAG) has been on a slow and steady growth streak in the past six months and is currently trading at $24.33.

So what are the implications for the poultry and vegetarian food producers? Fortunately for companies like Tyson Foods (NYSE: TSN), an increase in red meat production does not mean other protein production will suffer. Tyson has performed very consistently compared to the peaks and valleys red meat producers have endured.

Soy producers have seen steady growth and popularity over the past year as well. The dynamic material has so many different uses, but serving as a protein substitute, it offers superior nutrition, adaptable taste, and is vegan-friendly. Archer Daniels Midland Company (NYSE: ADM) has been growing steadily in the past year and is currently trading at $36.29. Competitor Bunge Limited (NYSE: BG) has also seen significant growth since 2010 and is currently trading at $74.96.

The Economic Research Service also said that the red meat export market looks promising in 2011. However, U.S. beef imports are likely going to face pressure from decreases in production and some of the highest prices in years due to the weak U.S. dollar.

 

Related Articles (ADM + BG)

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Posted-In: Archer Daniels Midland Company bunge limited conagra foods Economic Research Service Smithfield Foods Inc.News Economics Markets Best of Benzinga

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