WHEN the U.S. Department of Agriculture released the May "World Agricultural Supply & Demand Estimates" (WASDE) report, it reduced the red meat and poultry production forecast for 2014.
Moreover, the report showed the first projection for total 2015 U.S. red meat and poultry production, with higher estimated pork and poultry production than in 2014, which will offset a decline for beef.
USDA reduced total pork production for 2014 by 109 million lb., putting the total output at 22.668 billion lb., a 2.3% decline from the previous year.
In the "Daily Livestock Report," economists Steve Meyer and Len Steiner noted that the USDA projection is lower than private industry approximations, which gauged this year's pork production at 4-7% below 2013.
According to USDA, pork production is anticipated to increase in 2015 as pork producers respond to porcine epidemic diarrhea virus (PEDV) by increasing farrowings and feeding hogs to heavier weights. WASDE put the initial 2015 pork production forecast at 23.323 billion lb., up 655 million lb. from 2014.
USDA did not adjust 2014 pork exports, but the 2015 projection is set at 5.035 billion lb., close to 2013 levels.
An increase in pork supplies in late 2014 and into 2015 will drive hog prices lower.
Although the economic conditions are aligned for poultry producers to expand, the growth has not occurred as quickly as USDA previously predicted.
Broiler production was slashed 71 million lb. in WASDE and now is projected to rise only 1.6% from last year. Still, the 2015 broiler production forecast of 38.855 billion lb. — a 2.2% jump from 2014 — does appear optimistic on industry expansion.
USDA slightly increased turkey production for 2014 based on the slaughter pace established in the first quarter, and the 2015 estimate is up 0.4% from 2014.
Broiler and turkey exports are projected to be higher for 2014 and 2015 due to improved supplies and foreign demand.
Unlike for pork, an increase in broiler and turkey production will not decrease prices. Tight red meat supplies should keep poultry prices strong in 2015, according to the WASDE report.
As table egg production continues its upward trend, USDA raised 2014 overall egg production and also predicted prices to average $1.29-1.35/doz. for the rest of 2014 and $1.30-1.40/doz. for 2015.
USDA projected total beef production for 2014 at 24.634 billion lb., down 4.5% from the previous month's estimate, and pegged beef production for 2015 to be 24.386 billion lb., 1% below this year's forecast.
USDA expects the lower beef production to push down beef exports and increase imports, especially in 2015. For 2015, it projected beef exports at 2.425 billion lb., 3.3% lower than 2014, with imports at 2.396 billion lb. for 2014 and 2.445 billion lb. for 2015.
Since beef demand remains strong, USDA anticipates fed cattle prices to exceed the 2014 forecast.
Total milk production was unchanged for 2014 but higher for 2015 due to expected lower feed costs and healthy milk prices that will support herd expansion. A growth in nonfat dry milk, butterfat and cheese exports prompted USDA to raise the export forecast for 2014.
The all-milk price is expected to average $22.70-23.00/cwt. for 2014 and $19.70-20.70/cwt. for next year.
Real per capita expenditures (RPCE) for the four major muscle proteins — beef, chicken, pork and turkey — climbed to $44.13 in March, a 4% increase from 2013, according to Meyer and Steiner. This brings the year-to-date RPCE for the four species to $129.71, up 1.3% from last year (Figure).
In comparison to a year ago, chicken had the best gain, at 8.2%, while pork increased only 2.5% and beef rose 3.4%. Turkey, on the other hand, struggled, with a 2.3% decline.
Looking at year-to-date totals, pork RPCE is performing the best across the four species, at 5.2% above the previous year. At the same time, chicken RPCE climbed only 1%, while beef is even with 2013 and turkey is down 3.6%.
Elsewhere in the livestock and poultry markets, fear has reared its ugly head again as traders are becoming nervous about consumers' response to high beef and pork prices at the meat counter, compounded by uneasiness over actual future supplies. This kept prices volatile.
In the hog markets, prices will continue to fluctuate until market traders have confidence in the data on how PEDV will affect summer pork supplies.
After a rally last Wednesday with some summer contracts limit up, the lean hog futures June contract finished lower last week, at $119.425/cwt.
USDA reported slow market activity in the cash hog market arena on light demand, suggesting that butchers are satisfied with current pork inventory, which weakened cash prices. Nevertheless, it appears to be the calm before the storm as an obvious drop-off in market-ready hogs due to the PEDV outbreak should begin pressuring prices upward.
Last week, pork cutout values were also weaker, settling at $113.23/cwt. on Thursday.
Total hog slaughter for the week through last Thursday was 1.632 million head, up 4,000 from last year and up 27,000 from the previous week.
USDA's "Cattle on Feed" report, which was set to be released May 16, will provide an inkling of future beef supplies. If April placements come in lower, it will be the second straight month of fewer cattle entering feedlots after higher-than-expected placements in the first two months of this year.
The Livestock Marketing Information Center's pre-report estimates penciled May 1 cattle on feed at 98.9% of a year ago, April placements at 95.0% and April marketings at 98.0%.
The first USDA pastures and range condition report showed that about 39% of pastures are in the good to excellent range. While better than last year, it's still below the 10-year average. However, bad pasture conditions are not enough to motivate cow/calf producers to move heifers retained for herd expansion back into the slaughter mix at this time.
Overall, feeder cattle supplies will not improve, which has fueled feeder cattle prices to new heights, although that may be running out of steam.
According to Kansas State University estimates, feedlot closeout losses are in the $170-250-per-head range.
Higher fed cattle prices and lower feed costs or lower feeder cattle prices are the only way to get feedlots back in the black, Farm Progress analyst John Otte reported.
In the chicken markets, prices quietly slid higher, with the Georgia dock price at $1.0875/lb., compared to $1.0425/lb. a year ago. After gaining at the start of last week, breast meat closed at $2.075/lb., leg quarters at 54.5 cents/lb. and wings at $1.32/lb. last Wednesday.
Frozen turkey hens and toms ticked higher last week, with both at $1.02-1.10/lb.
Egg prices for all regions improved slightly, with large eggs at $1.17-1.21/doz. delivered to the Northeast, $1.16-1.19/doz. to the Southeast and $1.11-1.14/doz. to the Midwest.