From Lehman Brothers to Worldcom to the Soviet Union, many
seemingly robust institutions can disappear in a flash.
Other institutions can gradually fade away, which appears to
be happening with meat, which has also been an institution
Though people have relied on meat for centuries, as it played
a central role in many cultures, meat's predominance has begun to
fade. Here at home, Americans are eating less meat, particularly
red varieties like beef and pork.
The reasons for declining meat consumption aren't a mystery.
Doctors have been warning about greater cancer and other health
risks from eating too much red meat for quite some time, and
people finally got the message and have started cutting back.
What's shocking, though, is the extent of the change.
Annual per capita red meat consumption in the U.S. fell 15% to
101 pounds in the past 10 years, according to the U.S. Department
of Agriculture. It's down by a third since the early 1970s, when
per capita consumption was pushing 150 pounds per year. And the
downward consumption trend could soon accelerate, with major
negative implications for the meat industry.
The potential catalyst: the release of preliminary
recommendations from the committee of medical and nutrition
experts involved in developing USDA dietary guidelines. The
preliminary recommendations will be out later this month, and
they'll be used to finalize the next set of USDA guidelines due
out by the end of the year.
These events may seem relatively benign. After all, the USDA
has been periodically publishing dietary guidelines for years,
and they've never been terribly newsworthy before.
This time could be different, though, because the expert
committee has indicated it would like the 2015 version to be
written with the environment in mind. Specifically, it believes
dietary recommendations should be influenced by the fact that
animal agriculture is a leading source of the carbon-dioxide
emissions responsible for global warming.
Indeed, the United Nations puts the industry's emissions at
7.1 gigatons per year, or nearly 15% of all greenhouse gases
resulting from human activity. Beef production is the biggest
culprit, contributing 41% of livestock industry-related
emissions. Pork, poultry, egg and milk production all have
substantial carbon footprints, as well.
Then there's the issue of enormous resource use, like the
nearly 600 gallons of water needed to produce one pound of pork
and the 1,800 gallons per pound of beef. Animals raised for meat
also need tremendous amounts of feed grain which, because it
contains antibiotics, helps fuel the surge in bacterial
infections in humans that are more difficult or sometimes even
impossible to treat.
Because of these issues, the USDA expert committee may advise
eating less meat, especially red and processed meat. And that's
just what the committee proposed last month in a draft of its
preliminary recommendations, according to The Washington Post.
The draft also advises eating more of a plant-based diet because
of the smaller environmental impact.
If the USDA adopts these positions, then it'll be the first
time ever that the agency actively discourages meat consumption
(current guidelines encourage consumption by suggesting lean
Investors shouldn't underestimate the potential effect of this
on the meat industry, even though the general public is
notoriously resistant to any sort of health or diet-related
advice from the government.
In this case, the guidelines might be taken more seriously
because of concerns about global warming. They'd also have a
large and immediate role in shaping children's attitude toward
meat, since USDA dietary guidelines typically affect nutrition
education and food choices available through school lunch and
other public meal programs. In such a scenario, an even quicker
drop in demand for meats of all types could occur, especially if
the new guidelines heavily stress a more plant-based diet.
Risks To Consider:
As an upside risk, the meat industry lobby may be able to
convince the USDA to omit the expert committee's new
recommendations, or at least water them down enough to render
Action To Take -->
An unfavorable new set of USDA dietary guidelines could obviously
be a huge headwind for successful meat producers like
Tyson Foods, Inc. (NYSE:
Hormel Foods Corp. (NYSE:
and others. Risk tolerant investors may want to consider shorting
the stocks of such companies or relevant exchange-traded
securities like the
PowerShares DB Agriculture ETF (NYSE:
iPath Dow Jones-UBS Livestock Subindex Total Return ETN
. This strategy may be appropriate now, before the expert
committee's preliminary recommendations come out, or sometime
before the updated dietary guidelines are published.
Think twice about holding long positions in meat industry
stocks or exchange-traded securities if the new guidelines do
advise eating less meat. If the new guidelines come to pass, the
risk of long-term profit shrinkage would be much too great. A
reduction in our meat consumption would likely more than offset
still-rising meat consumption in other parts of the world.
Meat consumption has been steadily declining, which could play
out into a huge profit potential. My colleague Andy Obermueller
devotes his time to researching the next
. As I did above, he analyzes current trends to identify
companies with the potential for triple-digit returns. This has
led to gains of 89%, 92% and even 310% in a year. StreetAuthority
compiled a list of the hottest upcoming trends called "
The Hottest Investment Opportunities For 2015
" For more information on the game-changing opportunities that
could crush the market,