U.S. meat and poultry production is headed for what researchers at the Rabobank International Food & Agribusiness Research and Advisory (FAR) team anticipate to be a "precipitous fall" by mid-2012. Beef and broiler supplies are all expected to tighten as production increasingly lags behind GDP growth.

In a recent report, FAR analysts note the drought in the U.S. is a major contributor to the production decline, but the report finds that global meat and poultry production is in the midst of a multi-year process of adjusting to higher and more volatile feed costs. Since the U.S. is a large and significant exporter of meat protein, the decline will also affect world markets as well as demand for feed, notably for corn.

"The drastic decline in protein production we anticipate will be felt in a number of industries," says David Nelson, FAR global strategist. "We expect the decline will create concerns for everyone from foodservice operators to corn producers."

According to the report, U.S. per-capita meat consumption appears to have peaked. Analysts say the poultry industry, in particular, should no longer count on rising domestic demand as a means of growing its way out of over-production situations. However, a rising GDP in the developing world is contributing to an increasing global demand for meat protein.

"The greater global demand for meat protein is the key driver to rising feed costs, which, in turn, drive up the cost of raising animal protein," Nelson says. "Global meat and poultry production continues to significantly lag GDP growth, which is, of course, the key factor behind rising prices."