New Opportunities Emerge at the 2024 Agriculture, Food and Fuel Summit | Insights | Bloomberg Professional Services

This analysis comes from Jennifer Bartashus and Jason F. Miner, senior industry analysts at Bloomberg Intelligence. It first appeared on Bloomberg Terminal.

U.S. pork and poultry suppliers (Hormel, Tyson, Pilgrim’s Pride) could see modest production increases in 2024, while beef (JBS, Tyson) could face declines as cattle herds are not rebuilt as quickly, BI’s Farm, Food and This month’s Fuel Summit has been announced. Alternative proteins (Beyond Meat, Oatly) also remain a small but crucial element in the diet of the world’s population.

Poultry breeding rates, company closures in focus

Poultry production is expected to remain reasonably stable through 2024, although margin improvement is critical for producers and processors such as Tyson, Pilgrim’s Pride and JBS. Declines in soybean and corn prices reduce feed costs, which can help increase margins. However, in order to maintain bird size and consistent quality, the composition of the feed must not change much. This could have a negative impact on the health and growth of the animals. Although better, hatch rates are below historical levels, impacting production costs and overall supply. Warmer temperatures are expected to reduce the incidence of highly pathogenic bird flu, but the farm egg market has lost more than 3.8 million laying hens and pullets since April 1.

Processing plant consolidation continues, although automation investments could help increase the productivity of existing plants.

Pork and beef are still recovering from herd lows

Beef supply is likely to remain limited in 2024-2025 as we have not yet seen a significant increase in heifer ownership, one of the best leading indicators of supply. Other factors – weather, hay supply and interest rates – do not encourage investment in herd building. This means retail prices could remain high, which could impact consumer demand as well as JBS and Tyson.

Commercial pork production is expected to be slightly higher. The industry is grappling with the impact of California’s Proposition 12 (producers must provide sows at least 24 square feet of space per animal) and other similar state initiatives. This could impact demand and limit the rise in raw material prices, clouding the profit outlook for producers and processors like Hormel. Lower feed and transportation costs can help provide some margin expansion.

Dairy cows are better able to resist diseases

Avian influenza – or highly pathogenic avian influenza (HPAI) – has spread from wild birds to dairy cows in at least six states. In contrast to the high mortality rate of HPAI in poultry, the disease in dairy cows typically results in symptoms lasting seven to ten days, including a sharp decrease in milk production (4.5 to 13 kg per cow), loss of appetite, and low-grade fever. Milk from affected animals is being diverted or destroyed, so aggressive spread of the disease could impact short-term supplies. This could ultimately increase retail prices as well as inputs for packaged food manufacturers that use milk as a key ingredient.

The risks to human health and safety of commercial milk are expected to be low because the products are pasteurized before entering the market.

Food manufacturers and retailers could feel supply shortages

Packaged food and milk producing companies could face an increase in input costs if HPAI spreads widely through dairy cows. Cases were initially reported in Texas, but cases have since been confirmed in New Mexico, Kansas, Idaho, Ohio and Michigan. According to USDA ERS data, the top five milk producers – California, Wisconsin, Idaho, Texas and New York – accounted for 50% of the U.S.’s annual milk supply in 2022. Milk futures have barely moved during the still small outbreak.

Companies hit harder by milk costs include candy companies Hershey and Mondelez; those that make soft dairy products (sour cream, cream cheese, and yogurt), such as General Mills and Kraft Heinz; and companies that rely on milk as a consumer-added ingredient, such as: B. Cereals from WK Kellogg and Post.

Alternative proteins down, but not out

Retail sales of alternative protein products – particularly plant-based meat – have declined over the past two years, but the long-term outlook remains positive. The diversification of protein types has been embraced by Cargill, JBS, Tyson and others. Alternative proteins will supplement global meat production in a variety of forms in the coming years, from plant-based meats and dairy products to fortified protein powders. There are opportunities to significantly reduce greenhouse gas emissions along the entire food value chain.

Reduced access to capital injections was probably good for the sector. It has weeded out bad products and forced founders to rethink their strategies and develop solid business plans that include a clear path to profitability.