USDA Baseline projections: Connecting feed grain and meat production

Published 2021년 11월 10일

The USDA published its Early-Release Tables from USDA Agricultural Projections to 2031 on Friday (November 5th). These tables include projections for livestock, feed grains, soybeans, and dairy among others. Production of beef, pork, chicken, and turkey are forecast to increase by 4%, 8%, 13%, and 5% respectively for the 10 years ending 2031. Per capita beef consumption is forecast to drop by 5% over the 10 years ending 2031, while per capita pork and chicken consumption are forecast 3% and 6% higher respectively, but overall consumption of these meats are forecast to increase as the population increases. There were no noteworthy oddities in the feed grain or soybean industries and production is forecast to increase 15% and 16% respectively, mostly as a result of increased yields. The use of feed grains for feed and residual and domestic use of soybean meal are forecast 18% and 16% higher, which translates to higher use of animal feeds over the period of these projections. When this is compared to only a 9% increase in meat production it leaves a few question marks hanging.

Few surprises in the crop and soybean baseline projections

Baseline projections hardly ever make for exciting reading, but they do provide some certainty to the market nonetheless. Corn and soybean production is ingrained in US agriculture and whatever changes happen in the modus operandi of these industries, usually happen very gradually. A case in point is the area under soybeans that has increased ever so gradually over the years. Corn and soybeans are complementary in a rotational system, since soybeans are natural nitrogen fixers and when it is rotated with corn, both crops benefit. Looking at the baseline projections for these two crops is like watching paint dry. Corn and soybean production is estimated to increase by 15% and 16% respectively over the ten years ending 2031, mostly due to higher projected yields. This roughly 1.6% annual increase in yields can be attributed to improved farming techniques and technological advances.

Source: USDA

More chicken and pork, less beef

Per capita beef consumption is expected to decrease from 58.4 lbs in 2020 to 55.5 lbs in 2031, pork consumption is projected to increase from 50.6 lbs to 52.0 lbs, and broiler consumption from 96.2 lbs to 101.6 lbs. Per capita red meat and poultry consumption is forecast to increase by 1% over the projected period. Even this trend, where less beef and more pork and chicken is consumed, will not raise too many eyebrows. This is a common trend in many developed countries. With the expected growth in population, total meat consumption (or meat disappearance as it is referred to in this report) will increase across the board. Most notably, chicken consumption will increase from 44,583 million lbs (20.22 million MT) in 2020 to 50,475 million lbs (22.89 million MT) in 2031.

Source: USDA

Projected increase in feed usage and meat production not correlated

While there are no apparent surprises in these baseline projections, when taking a closer look at meat production and usage of feed grains and soybean meal, it becomes a perplexing question.

The USDA Baseline Projections give a complete breakdown of feed grain supply and demand. Included in this report and historic data by the USDA are yearly usage of feed grains for

Feed and residual
Food, seed, and industrial
Ethanol and byproducts and
Exports

This means very accurate data is available for grain being fed to animals. Also, domestic consumption of soybean meal is reported, which is used almost exclusively as animal feed.

Thus, when feed grain usage for feed and residual is identified, as well as the domestic use of soybean meal, it gives a fairly accurate picture of nearly all animal feed that will be used annually. Combined, feed grains (for feed and residual) and soybean meal (domestic consumption) are forecast to increase gradually over the next ten years by 17%. Again, there is not much excitement when looking only at these numbers in isolation.

The kicker however is that total meat production is expected to increase by far less than feed usage.

The production of beef, pork, broiler, and turkey is forecast to increase by only 9%. Nearly all cattle going to the beef market is fattened in the feedlot. Hogs are mostly fed feed grains, with soybean meal for added protein. Broilers are fed corn and soybean meal and so are turkeys. Therefore, It is obvious that the production of feed grains and soybean meal is highly correlated to meat output.

If these projections are thus followed to a tee, the meat industry will become less efficient according to these baseline projections, which makes little sense.

In order to make a comparison between historic data and the baseline projections, some sort of meat production efficiency correlation can be drawn up. A rough indication of meat production efficiency can be made under the following assumptions:

Cattle fattened in the feedlot, hogs, chickens, and turkeys are all fed feed rations consisting predominantly of grain and/or soybean meal
The USDA reports feed grains (corn, sorghum, oats, and barley) used for “feed and residual”. Thus is thus very accurate data for use of grain for animal feed
The USDA reports soybean meal used for “domestic consumption” and since soybean meal is almost exclusively used as a high protein animal feed, this means domestic consumption of soybean meal is in fact the same as soybean meal used for animal feed
When feed and residual use of feed grains are added to domestic use of soybean meal, it makes up the majority of all animal feed in the US
Beef, pork, broiler, and turkey consumption make up 99% of total meat consumption in the US (as in 2020), and thus lamb, veal and other meats play a negligible role in the US meat market

Comparing meat production of cattle, hogs, chickens, and turkeys to the feed and residual use of feed grains plus domestic use of soybean meal is thus a fair comparison of feed conversion to meat production.

When historic datasets based on the above assumptions are examined, there is an obvious trend where more meat is produced with less feed. On the other hand, when the baseline projections are analyzed in the above manner, there is an obvious trend where less meat is produced with more feed.

Source: USDA

One might argue that Americans have all of a sudden found a massive appetite for eggs, or maybe milk, however, both of these figures were also reported by the USDA. Milk production is projected to increase by 13%, to 252 billion lbs in 2031, less than the increase in feed usage as calculated above. Egg production is projected to increase by 17%, to 10,894 million dozen in 2031, roughly the same as the increase in feed usage.

Furthermore, the composition of meat production is shifting (ever so slowly) to more efficient users of feed, in the form of chickens and hogs. A respectable feed conversion ratio for cattle in a feedlot is roughly a gain of 1 kg live mass, for 6kg of feed, thus 1:6. Chickens have a much higher feed conversion ratio of roughly 1:1.6, and hogs roughly 1:3. Thus if anything, with more chickens and hogs being produced, feed efficiency should increase.

This means that the decreasing efficiency cannot be explained by the data released in the baseline projections. Or these baseline projections for grain and soybeans were made in isolation from the projections in the meat market. Whatever the case, changes in these deep-rooted industries rarely happen suddenly and in the end, these baseline projections are exactly that: projections.

The data tables released on Friday are the Early-Release Tables from USDA Agricultural Projections to 2031. The complete USDA agricultural projections report will be released in February.