Source: Rita Jane Gabbett, MEATINGPLACE, 5/3/18



As the U.S. economy enters what could be the tail end of the second longest expansion in U.S. history, there are implications for the meat industry, including a pending labor shortage and possible volatile commodity prices ahead, according to Rabobank Senior Food and Agribusiness Research Analyst Don Close.

In a recent presentation at the North American Meat Institute’s Meat Industry Summit, Close warned that the labor shortages meat processors currently face are about to get worse. He predicted escalating competition for labor and associated wage increases over the next 12 to 18 months. 

Also on the horizon for the meat industry: the possibility of more volatile feed grain prices. This is not because of supply shortages, but rather because as investors have fled equities out of nervousness that the bull market is ending, they have entered the commodity futures markets, making those markets more volatile.

There currently are large stocks of corn and soybeans in storage, which will continue if this is a normal crop year.
“But the ride this summer could be quite exciting,” said Close, noting that normal weather market price changes could be exacerbated by all the extra investors in the market.

Recession redux?
As for the stock market, Close does not expect the current expansion to continue long enough to set a new record (which was 120 months, and this expansion is in its 107th month). But he does believe there might be another rally before this bull market ends that could test the levels set in the first months of this year.

Citing the flattening yield curve, he called the risk of recession in the next 18 months “very, very high.”  

His concerns about the current economy include the large amount of unsecured debt, including student, car and credit card debt. This is of particular concern as millennials surpass baby boomers in numbers, and those young adults enter the economy burdened by student debt and car loans.

He also sees the labor shortage as “a big inhibitor going forward.” 

Close pointed to the drain of money needed to service government debt as “the biggest risk we have in this interest rate situation.” 

He catalogued trade and tariff wars as a question mark, hoping those will be averted, but warning that escalations would add to inflation and pressure on interest rates.

Citing the dramatic uptick in closing retail stores and increase in online shopping, Close said the old adage “location, location, location” is being replaced by “convenience, convenience, convenience.” 

For the food industry, that means less eating out and more food delivery, including restaurant food delivered by UberEats and meal kits. He predicted, however, a lot of consolidation in the meal kit sector, a business model that so far is having a hard time turning a profit.

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