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2.5 Billion Pound Meat Glut Could Lead To "Biggest Correction In Years"
Profile picture for user Tyler Durden
by Tyler Durden
Mon, 07/23/2018 - 14:59
https://www.zerohedge.com/news/2018-07-23/25-billion-pound-meat-glut-could-lead-biggest-correction-years
According to a new report by the Wall Street Journal, a mountain of meat is building in U.S. cold-storage facilities, spurred by a surge in production and President Trump’s trade war that is pressuring foreign demand.
More than 2.5 billion pounds of meat from beef, hog, poultry, and turkey are being stockpiled in cold-storage warehouses across the country amid trade disputes with major U.S. meat exporters. New federal data, coming out as early as Monday, is expected to show a record level of meat, which could send the industry into a continued deflationary collapse.
U.S. consumers’ demand is increasing, but not at levels that are in pace with record production of chickens and hogs. The excess supply is generally exported to Mexico and China—among the biggest foreign buyers of U.S. meat — have both recently slapped tariffs on U.S. hog products in response to President Trump’s tariffs on steel, aluminum, and other items. Industry officials told the WSJ that U.S. hams, chops and livers have become more expensive in international markets, coupled with a strong dollar weighing on local currencies, which has dramatically reduced demand for U.S. meats.
America’s meat industry production is rapidly filling up the specialized warehouses built to store meat. “We are packed full,” said Joe Rumsey, president of Arkansas-based Zero Mountain Inc.
Rumsey told WSJ that the company’s five storage facilities are stockpiling roughly 250 million pounds of chicken strips and turkeys on any given day.
Rapidly increasing meat stockpiles could force prices into a continued downward trend, which could be beneficial for meat-hungry U.S. consumers, along with restaurants and food retailers. While what is good for the consumer is usually bad for businesses, deflationary prices are quickly eroding margins for meat processors.
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