Meat and dairy are piling up across the U.S. It has cold storage places packed to the rafters, and the federal government, which subsidizes the agriculture industry, looking for ways to alleviate the problem, at least in the short-term.
A combination of factors have led to this: increased production, flat demand despite near-record consumption of milk and cheese and trade issues. And in the long run, it鈥檚 unclear whether market forces will get production in line with demand.
鈥淚t鈥檚 a perfect storm,鈥� said Corey Rosenbusch, president of the Global Cold Chain Alliance, a trade group representing the industry.
The facilities he represents are at 86 percent capacity, he said, adding, 鈥淚n our space, anywhere from 82 to 90 is considered full. There鈥檚 significantly high capacity and very little space available out there.鈥�
The market is unfazed
According to the U.S. Department of Agriculture, the average American is projected to eat 220 pounds of meat and consume more than 200 pounds of milk and cheese this year. That鈥檚 near the records set in 2007, right before the recession.
Production never stopped, though. It increased, despite the fact that demand is only now returning to pre-recession levels. On top of that, prices are low and the meatpacking and dairy sectors are increasingly efficient.
Bill Roenigk, an agricultural economist who works for several meat companies and trade groups, said producers are really only looking at one thing 鈥� the bottom line.
鈥淒o we have too much meat? On the one hand, we do. On the other hand, chicken is making money, certain parts of beef are making money, certain parts of the pork industry are making money,鈥� Roenigk said. 鈥淪o in that sense, if you鈥檙e making money, the signals are you should continue to do what you鈥檙e doing or produce a bit more.鈥�
On the dairy side, Roenigk said and increasing demand for cheese is propping up a business that is seeing milk demand slide.
鈥淚 don鈥檛 think companies are overly panicked when you ask them, is there too much meat and poultry out there,鈥� Roenigk said. 鈥淚 think most companies are in a position to manage any kind of adjustments that need to come.鈥�
Other industry analysts say the situation is unsustainable. Production has been outpacing demand for long enough that a breaking point is coming, University of Missouri ag economist Scott Brown said.
鈥淚t is sending the signal to the supply side of these industries to at least slow the growth that we have seen in the last few years,鈥� Brown said. 鈥淪o as I look ahead to 2019 and 2020 in particular, it seems like we are going to find a little better balance.鈥�
Chicken and pork are the industries most likely to nimbly change, Brown said, as chickens and pigs reach slaughtering age much quicker than cows. It鈥檒l take the beef industry longer to curtail production.
Brown also said trade issues may be the wild card, such as the Trump administration鈥檚 tariffs on chicken and the changes to the North American Free Trade Agreement that has reduced exports to markets, including China and Mexico.
鈥淚f those trade situations continue,鈥� Brown said, 鈥渋t鈥檚 hard to imagine producers won鈥檛 be forced to reduce their production.鈥�
A beneficiary
The extra meat and dairy has helped one segment: Food banks and the people they serve.
The USDA is buying 250 million pounds of meat and 65 million pounds of cheese and milk 鈥� mostly because of the tariffs 鈥� and distributing it to food banks.
The St. Louis Area Foodbank recently received so much additional milk that they scheduled an extra distribution day to hand out half-gallon jugs of whole milk to more than 100 cars lined up in a vacant parking lot.
鈥淚t's a blessing to us,鈥� said Lenora Gooden, Director of Operations for the St. Louis Area Food Bank. 鈥淏ecause it鈥檚 milk, and the stuff that can go bad quickly, that we don鈥檛 have to purchase. Because we don鈥檛 get it donated so much, in these quantities.鈥�
Gooden said the food bank is scheduled to get a similar delivery of meat in April.
鈥淲e鈥檒l take whatever they can give us. We just get a little more creative in how we distribute it,鈥� Gooden said.
Not to mention, there鈥檚 been some relief to the food pileup. China has had to kill millions of hogs due to an outbreak of African swine fever, leading the country to buy 23,000 tons of U.S. pork despite a 62 percent tariff. That鈥檚 meat that would have otherwise gone into cold storage or to food banks.
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