Livestock and dairy margins continue to adjust downward from their record levels set in late 2014, as production increases and export demand declines due to the increasing value of the U.S. dollar, according to a new report issued by AgriBank, the St. Paul-based Farm Credit Bank. After declining $26.5 billion in 2015, the USDA projects that total U.S. livestock and product receipts will decline another $9.6 billion (-2.5 percent) in 2016.
The report provides an overview of the livestock and dairy sectors across the 15-state AgriBank District and nationally. Major themes affecting the livestock and dairy sector in 2016 include domestic production cycles and price response, the U.S. dollar, disease potential and consumer behavior.
Turkeys – Receipts are projected to be down in 2016 for all of the major categories with the exception of turkeys, where the rebuilding of flock numbers and prices remaining near historic highs are expected to grow cash receipts by $300 million (+5.3 percent).
Eggs – The largest percentage loser is projected to be eggs (-16.1 percent), as the industry comes off record growth in 2015 due to the shortage caused by bird flu and record high prices.
“After a strong finish to 2014 with record profit margins for many livestock and dairy producers across the board, 2015 was, for the most part, a transition year to the reality of lower margins,” said Jeff Swanhorst, AgriBank executive vice president of credit and chief credit officer. “In 2016, the dominant themes will be the impact of several major categories entering or continuing their expansion phases of the production cycle, the increasing dollar’s negative impact on exports, the potential for additional disease events and their disruption of supplies and exports, and domestic consumer behavior with respect to saving and consumption. Additionally, the continuing theme of the reorientation of the global developing economies to a slower future growth path will also have an influence on the U.S. livestock and dairy sectors.”