There is a widening global poverty gap emerging. A gap between the “haves” and the “have nots” are widening. It is a story commonly heard. However, in this case the poorer countries are becoming the “haves” and the developed world is becoming the “have nots”. The story is U.S. livestock and poultry products, and as the charts below show, more and more of the dollars generated by U.S. farmers are coming from the world’s poorer residents.
This is an interesting scenario and helps explain the nature of global food production and pricing. Conventional wisdom would suggest that the best global prices would be fetched in the wealthiest economies. So why the growing disconnect for U.S. meat/dairy/egg exports? Here are a couple of thoughts.
First of all, meat/dairy/egg production is, in its most basic form, corn production. And the U.S. is not only the largest, but also the most competitive corn producer globally.
Second, the diversity of U.S. markets provides opportunities to compete more ambitiously overseas. Take broiler production for example. While the price of whole broilers in the U.S. is currently around $1.00/lb, breasts are running near $1.60/lb and wings are near $1.90/lb. This allows leg quarters (thighs and drums) to be priced near $0.50/lb. When you consider that most of the world prices broilers in whole-bird form, leg quarters at 50-60 cents/lb provide an incredible value overseas.
Another factor to consider the global economic state of affairs. The global recession that began in 2008 still shows after-effects across Europe and Japan—the bulk of the developed world. Per-capita GDP (income) growth rates are the best indicator of meat consumption and are rising much faster in developing countries.
Bottom Line: Most U.S. meat/dairy/egg exports are shifting toward developing nations. This also diversifies risk as more countries are less risky than a handful. However, the variety of food regulations and sanitary issues will amplify.