Meat, poultry production to dip

Meat, poultry production to dip

Reports set tone for 2014, with expectations for lower meat and poultry production but higher milk production.

ACCORDING to newly released reports from the U.S. Department of Agriculture and U.S. Dairy Export Council (USDEC), on the whole, forecasts for total red meat and poultry production for 2013 and 2014 were lowered from the December report, while milk production is expected to be higher.

USDA's "World Agricultural Supply & Demand Estimates" (WASDE) report issued Jan. 10 shocked traders by actually shaving the size of the 2013 corn crop and adding 100 million bu. to feed/residual use, increasing bushels for corn feed/residual use but reducing wheat feeding.

The end product is a total feed/residual use increase of 17% for all feed grains, which is interesting given the fact that only a small increase in livestock production is predicted.

 

Pork

Overall, USDA projected 2014 pork production at 23,580 million lb. (Table), but the true impact from porcine epidemic diarrhea virus on already tight hog supplies is still uncertain.

As shown in the USDA December "Hogs & Pigs" report, the intention of pork producers is to farrow 1.4% more females in the first half of 2014. The combination of relatively slow growth in litter rates and continued higher farrowings is anticipated to yield a 2% larger pig crop this year.

Cheaper feed prices should motivate pork producers to keep hogs on feed for longer, which will result in heavier slaughter weights.

While marginal growth is estimated for commercial slaughter numbers, the increase in dressed weights will contribute to the 2% pig crop increase.

 

Dairy

At the end of November 2013, U.S. dairy exports were on track to have a fourth consecutive record year, USDEC said in its year-in-review report.

Although the official final numbers for 2013 will not be reported until February, the U.S. dairy export value is on pace to approach $6.7 billion, 16% of total U.S. milk solids.

Record highs are expected for nonfat dry and skim milk powders, cheese, lactose and fluid milk and high-value whey protein concentrates and isolates.

Global market conditions in 2013 were promising for U.S. dairy exporters, with the U.S. being the world's only major exporter to increase milk production in the first half of the year.

In addition, the domestic supply decreased in China and Russia while demand remained strong. As a result of tight global dairy supplies, U.S. prices were competitive against other sources.

WASDE forecasted a better return on investment per dairy cow and continued strength of exports for 2014.

Herd expansion is predicted for 2014 thanks to moderate feed costs and higher milk prices.

The 2014 cow numbers are projected to remain at 9.25 million head, but USDA raised the yield per cow estimate slightly from the December number to 22,230 lb. Milk production is projected to be 205.6 billion lb. for 2014.

For the new calendar year, prices for exported cheese, butter and nonfat dry milk are expected to increase, and domestic demand is also anticipated to be strong, but dry whey is forecasted to remain unchanged, according to WASDE.

 

Beef

Cow slaughter in 2013 potentially set the stage for a further decline in total cow inventories for 2014, according to the USDA "Livestock, Dairy & Poultry Outlook" report.

In 2013, commercial beef cow slaughter was on pace to be the sixth consecutive year for cow slaughter to exceed 10% of Jan. 1 beef cow inventories.

At the start of this year, fed cattle prices soared following the holidays, possibly because packers did not arrange enough cattle ahead of the holidays to maintain adequate supplies of beef to meet demand, and intense winter weather disrupted the transport of cattle.

Yet, the breakeven prices in the southern Plains are projected to drop below $130/cwt. at least through April. Cattle feeding margins should continue to be positive if fed cattle prices stay at or above $130/cwt.

For 2014, average dressing weights should be higher as low corn prices provide an incentive to feed cattle for longer. A larger number of heifers will be retained, which will ultimately result in more steers and fewer cows or heifers in the slaughter mix.

The packer margin will improve only if cutout values continue to increase enough to pass through fed cattle prices.

According to the report, retail beef prices should also average higher in 2014 than the previous year. Still, only time will tell if consumers are willing to continue to pay high prices for beef rather than lower-priced protein alternatives such as pork or poultry.

USDA projected beef exports for 2014 at 2.335 billion lb., an 8% decline from the previous year.

 

Poultry

At the end of November 2013, broiler meat production was 34.7 billion lb., 1.6% higher than same 11-month period in 2012. One less slaughter day resulted in a 1.4% decline in broiler meat production for November, but that was offset by a 1% increase in average weight to 6.01 lb.

USDA estimated broiler meat production for 2014 to be 38.9 billion lb., a 3% increase from the expected total for 2013.

Since higher production resulted in more product being held in cold storage, the estimate for 2013 was increased by 25 million lb. to 700 million.

Broiler stocks are projected to be lower for 2014; however, higher general cold storage holding for broiler products will continue through the first quarter.

With higher supply levels and higher production to start out 2014, prices are anticipated to come under some downward pressure, but to what extent will be dependent on consumers' response to high beef prices, according to the USDA outlook.

Broiler exports for 2013 were estimated to be 7.416 billion lb.

USDA reduced turkey production estimates for the fourth quarter of 2013 by 25 million lb. to 1.425 billion lb. due to lower production levels in October and November.

Likewise, USDA lowered its outlook for turkey production in the first quarter of 2014 by 20 million lb. to 1.39 billion lb., but an increase in the second half of 2014 is expected.

For the first time since May 2012, the average weight declined, reaching 28.6 lb., a 1.3% drop from the previous year. The number of turkeys slaughtered in November was also down, totaling 20.9 million birds.

Turkey shipments were 8.6% lower in November from a year ago, leaving the forecast for 2013 unchanged at 767 million lb.

Strong demand for eggs in December pushed the average fourth-quarter price to $1.43/doz., which is an increase from the previous year.

Wholesale egg prices in 2014 are expected to be 8% lower than previous year, averaging $1.16-1.20/doz. for the first quarter due to anticipated higher production and lower feed costs.

USDA added 5 million doz. to 2013 egg exports from last month's estimate to come to a total of 358.8 million doz. Currently, the USDA forecast for 2014 egg exports stands at 307 million doz.

 

Market roundup

Overall records were smashed for beef prices last week. The Choice cutout was at $228.79 on Jan. 16, continuing a streak of breaking record highs — the previous of which was $211.73 on May 23, 2013 — while cattle futures also rallied last week to hit all-time highs Tuesday through Thursday.

Live cattle for February ended on a record-breaking high of $140.15 at Thursday's close. Analysts are wondering how high beef prices will go.

For the third week, holidays and weather have limited hog slaughter, but packers are showing no struggle with meeting orders, which suggests that demand for pork has not improved.

Still, hog futures did recover last Thursday to $86.87/cwt. on thoughts that pork demand should improve domestically and globally due to hog prices, according to Farm Progress analyst John Otte.

In December, chicken production rose for the third month in a row mainly due to higher bird weights and slaughter, the USDA report explains. Poultry companies are expected to decrease production to help boost prices.

 

U.S. meat, poultry and egg production forecasts, million lb.

 

2013

2014

Beef

25,717

24,320

Pork

23,195

23,580

Broilers

37,751

38,900

Turkeys

5,810

5,895

Table eggs, mil. doz.

6,857

6,970

Source: U.S. Department of Agriculture.

 

Volume:86 Issue:03

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