Cattle raise ships

Cattle raise ships

Very tight beef supplies will support beef prices even next to pork and poultry

THE cattle situation is like the high tide that's raising all ships — or, in this case, all species.

Cow/calf producers — in response to uncertain profitability and, in recent years, drought of almost historic significance — have liquidated their herds so substantially that the national cow herd is the smallest in more than 50 years.

Feeder supplies for feedlots and fed supplies for packing plants are so tight that even record-heavy liveweights can't support the beef supply. This is reflected in projections for beef production this year to be down 3.1% from year ago and down another 4.0% in 2014 from this year (Table 1) and in a per capita beef supply that continues to decline (Table 2).

The beef production and supply will more than "hold back" increasing pork and poultry production and underwrite high prices for livestock and poultry this year and in 2014 (Table 3), according to U.S. Department of Agriculture estimates.

The estimates also demonstrate the extent to which livestock and poultry producers cut back in 2008 in response to escalating corn and soybean meal costs.

The per capita beef supply in 2014 will be 13.4% lower than in 2008, and despite expansion this year and next, the pork supply still will be 3.6% lower next year than in 2008, the turkey supply still will be 4.5% lower and the chicken supply will be just even.

In the meantime, the U.S. population will have increased roughly 6.0%.

Given that meat and poultry supplies are not keeping up with population growth, consumer prices have to increase, and they are.

USDA currently shows a 3.0-4.0% increase in food price inflation this year for beef — after a 10.2% increase in 2011 and a 6.4% increase in 2012. Inflation for pork and poultry follows a similar trend.

Beef has much to do with the overall picture as beef's supply tightness and record-high retail prices are driving consumers to pork and poultry and providing strength there even for larger supplies, according to Feedstuffs sources.

 

Too much

The cattle tide is likely to raise ships even higher in the months, if not the years, to come as cow/calf producers appear to be continuing to liquidate cows, sources said.

A glance at pasture and range conditions as of May 12 clearly highlights the challenges producers have just to feed their animals and maintain their herds, according to Glynn T. Tonsor, an agricultural economist at Kansas State University.

He noted that pasture and range conditions in the country's two largest cow/calf regions — the Great Plains and the southern Plains, which account for 29.6% and 19.7% of the cow herd, respectively — were poor to very poor in 56.9% of the Great Plains and 47.0% of the southern Plains.

He also noted that the Great Plains is home to the largest number of retained heifers, which means that the largest cow region with the most opportunity to begin herd rebuilding is the least likely to do so because of ongoing drought and deteriorating grass.

This suggests that prospects for stabilizing the U.S. herd this year have been delayed, if not set back entirely, Tonsor said.

Oklahoma State University livestock marketing specialist Derrell S. Peel, writing in an issue of his "Cow/Calf Corner," agreed.

He reported that the most recent U.S. Drought Monitor indicates that 33% of the country is in D-2 to D-4 drought — which actually is worse than at this time last year, when only 20% was in D-2 or worse drought — with current drought conditions confined mostly to the Great Plains.

The cold and long winter carried over the 2012 drought, creating additional demand for hay and additional stress on pastures and ranges, he said.

Peel said the crop progress report last week put the hay inventory at 14.2 million tons — down 36% from the 10-year average and the smallest for the date since 1973 — and given cold weather delays in planting this spring and drought conditions, hay production and supplies are likely to remain short of needs for the rest of this year.

"Too much winter was just too much winter for many (cow/calf) producers," Peel said, and not only are grazing strategies in trouble, but so is supplemental feeding with hay.

This is contributing to unexpectedly high beef cow slaughter this spring and larger-than-foreseen feeder placements in the last two months as replacement heifers have been taken out of the pool and trucked to feedlots, he said.

"Another year of beef cow liquidation may already be inevitable," Peel said.

This will adversely affect the beef industry's productive capacity "for several years," Steve Meyer and Len Steiner said in an edition of the "Daily Livestock Report."

 

Market roundup

The cattle markets were just lightly tested last week, with cattle trading at $125/cwt. in the Southwest last Thursday, down $1 from the week before but 1.6% higher than the year before.

Observers were a bit surprised that cattle didn't rally, given daily increases in beef prices that gave packers an incentive to bid cattle up, especially as plants were short bought for Memorial Day weekend beef demand, and a smaller feedlot showlist than the week before.

However, sources said feedlots opened with offers that were just too high and met with packer resistance. Sources also said traders don't expect beef prices to hold at current levels, which won't be supportive to cattle, and were bidding futures lower, with both the June and August boards closing under $120 last Thursday.

The Choice cutout increased $3.28 cents last week to a new record high of $208.77/cwt. last Thursday, 9.2% higher than year ago.

The hog markets were up $1.94 in the eastern Corn Belt but down $1.82 out west last week and were $88.30-90.63/cwt. on a lean carcass basis last Thursday, equivalent to a $67-68 live cash hog market and 8.9% more than year ago.

Sources said packers were operating in the red but were bidding for hogs because supplies were limited and plants needed to encourage farmers to get off their tractors and load hogs.

Prices still were below breakeven, with June and July contracts managing to close last Thursday at breakeven levels but then at losses for the rest of the year. The good news is that the boards do show profits — at times good profits — starting next spring into next summer.

The chicken markets were firm and higher last week as companies assessed cleanup from Mother's Day and demand for the upcoming Memorial Day weekend, sources said. Supplies were considered light.

Chickens were $1.11-1.16 and $1.02-1.09/lb. in the eastern and midwestern regions last Thursday, up 4-5 cents from the week before, up 32.7% from the year before and both record high.

Breast meat was $2.04-2.14/lb., up 12 cents from the week before and up 39.3% from the year before.

Full wings were up 1-5 cents to $1.30-1.36/lb. as quick-service restaurants seized on cheaper prices in recent weeks to feature wings, sources said. However, wings still were 20.4% less than year ago.

The egg markets advanced another 14-15 cents and have picked up 38 cents in the last three weeks due mainly to demand from Mexico, which is buying eggs to meet consumer demand following large-scale slaughter of flocks to curtail an outbreak of avian influenza, sources said.

Eggs were $1.32-1.36 and $1.24-1.26/doz. for large-sized eggs delivered to eastern and midwestern store doors last Thursday, 42.6% higher than year ago.

Analysts said supplies were light and held with confidence, and markets could gain another 5 cents this week.

The turkey markets were unchanged at an average offer last Thursday of 95 cents to $1.01/lb. for hens and 92 cents to $1.01/lb. for retail-sized toms, 9.7% and 11.9% lower than year ago. However, sources said a strengthening undertone could provide some higher prices for sales after Memorial Day.

Fresh tom breast meat was unchanged at $1.55/lb., 19.7% lower than year ago.

 

1. Dairy, meat and poultry production

 

 

 

Total

 

 

Total

Total meat,

 

 

 

Beef

Pork

meat

Chicken

Turkey

poultry

poultry

Milk

Eggs,

Year

-Billion lb.-

bil. doz.

2008

26.561

23.347

50.225

36.908

6.246

43.712

93.397

190.0

6.403

2012

25.913

23.253

49.439

37.039

5.967

43.523

92.962

200.3

6.722

2013

25.107

23.482

48.858

37.743

5.959

44.216

93.074

201.8

6.800

2014

24.105

24.025

49.389

38.850

6.175

45.560

93.949

204.6

7.025

2013 as % of 2012

96.9

101.0

98.8

101.9

99.9

101.6

100.1

100.7

101.2

2013 as % of 2008

94.5

100.6

97.3

102.3

95.4

101.2

99.7

106.2

106.2

2014 as % of 2013

96.0

102.3

101.1

102.9

103.6

103.0

100.9

101.4

103.3

2014 as % of 2008

90.8

102.9

98.3

105.3

98.9

104.2

100.6

107.7

109.7

Note: Eggs are table eggs as reported by the U.S. Economic Research Service.

 

2. Meat and poultry per capita consumption (supply)

 

 

 

Total

 

 

Total

Total meat,

 

 

Beef

Pork

meat

Chicken

Turkey

poultry

poultry

Eggs,

Year

-Lb.-

number

2008

62.7

49.4

113.5

83.4

17.6

101.0

215.9

248.3

2012

57.4

45.9

104.5

80.4

16.0

97.8

202.2

249.7

2013

56.1

47.2

104.5

82.0

16.2

99.5

204.0

252.0

2014

54.3

47.6

103.0

83.5

16.8

101.6

204.6

254.1

Note: Meat and poultry consumption is retail weight basis.

 

3. Meat, poultry, milk and egg prices

 

Steers

Hogs

Chickens

Turkeys

Milk,

Eggs,

Year

-$/cwt.-

-Cents/lb.-

$/cwt.

$/doz.

2008

92.27

47.84

79.7

87.5

18.29

1.28

2012

122.86

60.88

86.6

105.6

18.53

1.17

2013

128.50

59.00

102

101

19.75

1.17

2014

133.00

58.00

92

98.5

18.35

1.12

Note: Steers are average of all grades. Hogs are liveweight basis. Prices for 2013 and 2014 are at midpoint of ranges.

Source for Tables: USDA "World Agricultural Supply & Demand Estimates."

 

Volume:85 Issue:20

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