The U.S. Department of Agriculture’s National Agricultural Statistics Service (NASS) released the January “World Agricultural Supply & Demand Estimates” report this week, lowering its estimate of 2015 total meat production from last month as lower pork, broiler and turkey production more than offset higher beef production. For 2016, however, NASS raised its total meat production forecast due to higher pork, broiler and turkey production, which will more than offset lower forecasted beef production (Table 1).

Higher cattle slaughter in late 2015 resulted in a higher beef production estimate, but lower-than-expected cattle placements in late 2015 were expected to result in lower fed cattle marketings and slaughter in 2016, the report noted. As such, USDA lowered the beef production forecast for 2016.

USDA will release its semi-annual "Cattle" report on Jan. 29, providing estimates of heifers held for breeding and insight into the number of cattle that might be available for placement during 2016.

Len Steiner and Steve Meyer noted in the “Daily Livestock Report” that despite USDA making some very significant downward revisions over the last two months to its supply projections for 2016, futures markets continue to hold a very bearish view of fed cattle prices, especially for the second half of 2016. October 2016 fed cattle futures are currently priced around $121/cwt., but in early November 2015, this futures contract was trading at around $132/cwt., they noted.

“It appears to us that futures at this time are not just pricing the impact of higher beef supplies. Rather, they also appear to be pricing the impact of much lower meat protein prices, sharply lower commodity prices and the potential for a dramatic global slowdown that could disproportionately impact beef prices,” they said.

USDA lowered pork production for 2015 as end-of-the-year slaughter was less than expected but increased its pork production estimate slightly for 2016. The "Quarterly Hogs & Pigs" report, released Dec. 23, indicated that producers intend to farrow slightly fewer sows, on average, during the first half of 2016, which may limit growth in the pig crop despite growth in pigs per litter, NASS noted. However, heavier carcass weights will support increased pork production.

“While the latest 'Hogs & Pigs' report showed smaller-than-expected farrowings, it also told us that the breeding herd remains much larger than a year ago, and productivity gains will likely offset the impact of lower farrowings,” Steiner and Meyer noted.

USDA lowered broiler production for 2015 based on slaughter and hatchery data, but the agency raised the figure for 2016 primarily on higher forecasted broiler prices. Turkey production was raised for both the end of 2015 and early 2016 based on slaughter and hatchery data. Egg production figures for 2015 and 2016 were unchanged.

Beef imports for 2015 and 2016 were reduced, reflecting the pace of trade to date and relatively weak prices for processing beef. USDA raised estimates for beef exports for the last quarter of 2015 and early 2016 due to gains in sales to a number of markets. Pork imports and exports were unchanged from last month. Broiler and turkey exports for 2015 and 2016 were reduced from last month as the export recovery has been slower than expected, according to the report.

Steiner and Meyer said exports will remain a key driver for the chicken and overall meat markets in 2016.

Livestock and poultry prices for 2015 were adjusted for December data (Table 2). For 2016, USDA made no change to the cattle price forecast. The 2016 hog price forecast was reduced as large supplies of hogs and competition from other meats pressured prices in late 2015 and were expected to pressure prices in early 2016. Broiler prices improved in late 2015 and early 2016, and USDA raised the price forecast for 2016. Egg prices were lowered for 2016, reflecting recent price movements.

USDA raised its milk production figure for 2015 based on slightly stronger growth in milk per cow but reduced its 2016 milk production forecast from last month. Cow numbers were reduced due to lower expected milk prices and the recent blizzard in Texas and New Mexico. Growth in milk per cow was reduced on lower milk prices. USDA lowered exports on both a fat and skim-solids basis as global supplies of dairy products remain large and demand remains relatively weak. Continued strength in domestic butter use will also limit the competitiveness of U.S. butter in world markets, the NASS report suggested. USDA left fat and skim-solids basis imports unchanged for 2015 but raised the figures for 2016 largely due to increased cheese imports.

Dairy product prices for 2015 were adjusted for December data. For 2016, USDA raised butter prices from last month on relatively strong demand and lower expected production. Cheese, nonfat dry milk (NDM) and whey prices were reduced.

“Relatively large beginning stocks of cheese and weaker beginning-year prices underlie the reduction in the cheese price forecast,” the report noted, adding that NDM and whey prices were expected to be pressured by weakness in exports.

USDA lowered the Class III price for 2016 based on lower cheese and whey prices, and the Class IV price was reduced as a lower NDM price more than offsets a higher butter price. The all-milk price was lowered to $15.35-16.15/cwt. for 2016.

Market recap

Cattle prices were mixed this week but lower than last week. February fed cattle futures finished lower Monday at $132.225/cwt. and continued to fall through Tuesday. Despite closing higher Wednesday, nearby contracts fell again to close lower Thursday at $130.55/cwt.

January feeder cattle futures finished mostly higher this week but were also lower than the prior week. Nearby contracts closed higher Monday at $159.45/cwt. and climbed to $160.775/cwt. by Wednesday’s close.  By Thursday, however, they fell to close at $158.80/cwt.

The beef cutouts continued to climb this week. Choice closed lower at $235.16/cwt., while Select closed higher at $229.43/cwt.

February lean hog futures were mixed this week. Nearby contracts closed lower Monday at $59.70/cwt. but posted some gains Tuesday. They closed lower again Wednesday at $61.625/cwt. but recovered the losses Thursday to close higher at $62.35/cwt.

Pork cutout values were all higher for the week. Wholesale pork cutout finished at $72.14/cwt., an increase from $69.78/cwt. the previous week.  Loins, hams and bellies also all closed higher, at $78.78/cwt., $54.27/cwt. and $113.58/cwt., respectively.

Hogs delivered to the western Corn Belt were higher than last week, closing at $52.35/cwt. on Thursday.

In the poultry markets, the Georgia dock was unchanged Wednesday at $1.13/lb. Breast meat prices were also unchanged at $1.465/lb. Leg quarters decreased to 34 cents/lb., while wings climbed 5 cents to $1.58/lb.

According to the U.S. Department of Agriculture, California and regional egg prices were steady on Thursday, with a higher undertone. Offerings were light to moderate, and supplies were usually moderate, although light to moderate in California.  Demand was moderate to good, USDA reported.

Large eggs delivered to the Northeast, Southeast and Midwest were all unchanged at 99 cents to $1.03/doz., $1.00-1.03/doz. and 92-95 cents/doz., respectively. Large eggs delivered to California were also unchanged at $2.05/doz.

The turkey markets on Thursday were steady, at best, according to USDA. Offering prices were light to moderate, with light demand. Prices for hens and toms were unchanged at $1.12-1.19/lb. and $1.12-1.38/lb., respectively.