Livestock margin pressures expected to continue
© Copyright Agri-Pulse Communications, Inc.
WASHINGTON, Nov. 19, 2012- USDA’s Livestock, Dairy and Poultry Outlook released last week indicated that beef packers reduced slaughter in 2012, but beef production is down by less than slaughter would indicate.
Despite considerable discussion about shortages of cattle and calves looming for the remainder of 2012, 2013, and beyond, the total number of steers and heifers on feed in feedlots of 1,000 head or more on October 1, 2012 was 2.7 percent below October 2011 (second highest in the last 10 years), but 1.8 percent above October 2010, according to USDA. It was the third highest October 1 inventory of steers and heifers on feed in 1000-plus-head lots (behind 2006 and 2011) and the second highest steer inventory (behind 2006) in the last 10 years.Beef packers reduced kills for several weeks in an attempt to pressure fed cattle prices lower and improve their currently negative profit margins. Weekly federally inspected cattle slaughter through November was 4 percent below both 2011 and 2010 and 2 percent below 2009. However, heavier dressed weights resulted in beef production through November that was not quite 2 percent below same-period in 2011 and 2010.
“Cattle feeders’ and beef packers’ poor margins will likely continue until cattle and beef prices reach levels that generate positive margins for both sectors, or until grain prices decline to levels that make cattle feeding profitable enough for packers to achieve positive margins,” stated the report.
Chairman of the World Agricultural Outlook Board Gerry Bange noted the price ceiling may be broken next year. Currently, retail Choice beef prices continue to struggle to move above $5 per pound.
“Relief for either cattle feeders or beef packers looks unlikely over the coming year, except at the expense of one or the other, until higher cattle prices are matched by higher retail beef prices, feeder cattle prices decline, and/or lower corn prices result in feed costs low enough to allow cattle feeding profits,” according to the report.
For the dairy industry, the report noted that feed price forecasts continue to decline, but no production rebound in expected in 2013.
“The moderate contraction in herd size is expected to continue in 2013,” stated the report.
Export demand for powders remains strong, but export demand for butterfat is weaker. Prices for Class III, Class IV, and all milk will trail 2011 prices both this year and next.
Pork production forecasts were lowered slightly to reflect lighter expected hog weights. Nonetheless, fourth-quarter 2012 pork production is forecast 1 percent above the same period last year. Pork production in 2013 is expected to decline by 1.4 percent. Fourth-quarter 2012 hog prices are expected to average about 10 percent below a year ago. In 2013, hog prices are expected to rebound, increasing about 6 percent above average hog prices in 2012.
Broiler meat production in fourth-quarter 2012 is forecast at 9.05 billion pounds, about 2 percent higher than a year earlier. Broiler meat production in 2013 is forecast at 36.4 billion pounds, a decrease of 1 percent from 2012. Broiler integrators are not expected to have any incentive to expand production due to the combination of continued high prices for corn and soybean meal and expected relatively modest growth in broiler prices.
Turkey meat production in fourth-quarter 2012 is forecast at 1.55 billion pounds, which again would be almost a 4-percent increase from the same period a year earlier. At the end of September, stocks of whole turkeys were estimated at 305 million pounds, up 9 percent from a year earlier. Higher whole bird stocks have placed downward price pressure on their wholesale prices. Table egg production in third-quarter 2012 was 1.67 billion dozen, up 1 percent from the same period in 2011.
For more details on this report, go here: http://www.ers.usda.gov/media/949018/ldpm221.pdf