Red meat supplies record high

by Ron Sterk
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KANSAS CITY — Continued liquidation of cattle, especially dairy, and hog herds due to poor returns boosted June red meat production to a record high, but cattle and hog inventory and cattle on feed reports point to lower meat supplies yet in 2009 and in 2010.

A little over a year ago milk, beef and pork producers faced red ink because of record or near record high prices for key feed ingredients such as corn and soybean meal. But just as feed prices dropped by 50%, or more in some cases, in the second half of last year, demand began to fall as the U.S. and global economy slumped into its worst recession in decades. Much of the initial demand loss was on the export front as shipments soared in 2007 due to the weak U.S. dollar. But then domestic demand also slipped due to the recession.

Commercial red meat production in June was a record 4.16 billion lbs, up 3% from a year ago, the U.S. Department of Agriculture said in its latest Livestock Slaughter report. June beef production was 2.29 billion lbs, up 1% from June 2008, and pork outturn was 1.85 billion lbs, up 5%. For cattle and hogs, both the number killed and average slaughter weights were above year-ago levels in June.

Meat supplies remain abundant with frozen red meat stocks on June 30 totaling 1.04 billion lbs, up 6% from a year earlier, the U.S.D.A. said in its most recent Cold Storage report.

Dairy cow slaughter in the first six months of 2009 totaled 1,445,000 head, up 15% from the same period last year. For the same time, combined steer and heifer slaughter was down 5%, "other" cows were down 10% and bulls were down 7%.

At least one more round of dairy herd liquidation will occur this year under the voluntary program administered by Cooperatives Working Together. Those cattle are expected to be slaughtered in the third quarter, adding more beef to the U.S. supply. The first liquidation round was the largest ever, resulting in the slaughter of about 101,000 dairy cattle in May and June.

Meanwhile, the beef herd continues to dwindle. The number of fed cattle marketed in June was 1,989,000 head, up 1% from a year ago but the second lowest for June since the U.S.D.A. began tracking data for 1,000 head and larger feedlots in 1996, the department said in its latest Cattle on Feed report. The number of cattle on feed July 1 totaled 9,752,000 head, down 5% from a year earlier, and the number of animals placed on feed during June was 1,391,000 head, down 8% from last year.

All cattle and calves in the United States on July 1 totaled 101.8 million head, down 1% from a year ago, the U.S.D.A. said in its mid-year Cattle report. The number of "beef replacement heifers," or those that will go into the breeding herd, were down 2% from a year ago. The total U.S. cattle numbers on Jan. 1, 2009, already were at a 50-year low, according to the U.S.D.A.

The lower cattle on feed numbers, along with lower inventory and especially lower replacement heifer numbers, will eventually lead to lower beef production.

After rising 1% from a year earlier in 2007 and 0.5% in 2008, total beef production is expected to decline 1% in 2009 and 1.3% in 2010, the U.S.D.A. said in its latest Livestock, Dairy and Poultry Outlook. Further, despite slaughter cattle prices at lows for the year, lower feed costs were expected to provide some profit for cattle feeders in the second and third quarters, the U.S.D.A. said.

The picture also has been dismal for the hog industry, indicated by the recent decision by Tyson Foods, Inc. to liquidate about 20,000 sows, or 28% of its breeding herd, over the next couple of months.

In its most recent Quarterly Hogs and Pigs report, the U.S.D.A. said the U.S. hog inventory on June 1 was 66.1 million head, down 2% from a year earlier, with the breeding inventory down 3%. It was the fourth consecutive year-over-year reduction in June 1 breeding numbers.

"Reduction of industry breeding capacity is both a necessary and predictable step to restore profitability to the sector, given the magnitude and duration of negative producer returns," the U.S.D.A. said. "Iowa State University estimates average monthly per-head losses at about $22 since October 2007, the point where persistent losses began."

Total pork production increased 4% from a year earlier in 2007 and gained another 6% in 2008, the U.S.D.A. said. Outturn was forecast to drop by 2% in 2009 and another 1% in 2010 as liquidation finally may have an impact. Some of the cutback in the hog breeding herd has been negated by more pigs per litter, the U.S.D.A. noted.

In addition to lower pork production, the U.S.D.A. also forecast lower hog prices in 2009, because of weak demand, which does not bode well for a return to profitability for hog producers.

This article can also be found in the digital edition of Food Business News, August 4, 2009, starting on Page 22. Click here to search that archive.

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