Beef, turkey and egg prices expected weaker in 2009

by Ron Sterk
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WASHINGTON — Poor returns are expected to result in reduced production of poultry meat and red meat in 2009 while weak economic conditions negatively affect demand for red meat and turkey but might boost broiler demand, the U.S. Department of Agriculture said at its recent Agricultural Outlook Forum.

"The economic weakness is expected to continue to exert downward pressure on the meat sector through weak demand and, in the face of poor returns, production of meat from each major livestock and poultry category is forecast to decline for the first time since 1973," the U.S.D.A. said.

The U.S. cattle inventory on Jan. 1 was the lowest since 1959 as producers cut their herds due to drought and high feed prices.

"Even with normal grazing conditions, relatively weak first-half 2009 feed calf prices will likely limit the recovery in cow-calf returns and delay any expansion in cow numbers and the calf crop into 2010 or beyond," the U.S.D.A. said. Cattle feeders, meanwhile, have seen negative returns for nearly two years and Jan. 1 cattle on feed numbers were down 7% from a year earlier.

The U.S.D.A. forecast U.S. beef production to decline about 1% to 26,477 million lbs in 2009. Beef supply also will be affected by reduced cattle numbers imported from Canada but increased slaughter of U.S. dairy cattle due to poor returns in that sector.

The U.S.D.A. expects beef exports in 2009 to decrease slightly from sharply higher 2008 levels as shipments are still in recovery from the sharp drop off in late 2003 after bovine spongiform encephalopathy (mad cow disease) was identified in the United States. Domestic demand was forecast to decline about 1% from 2008 on a per capita basis.

Although beef is especially susceptible to loss of demand because of its price relative to pork and poultry, the U.S.D.A. forecast the average retail price of choice beef in 2009 to hold about even with 2008 at $4.33 a lb, with stronger fourth-quarter 2009 prices pulling the average higher.

Retail pork prices, meanwhile, were forecast to average just below $3 a lb in 2009, up slightly from 2008, as increased domestic demand more than offset an expected sharp drop in exports.

After negative returns for most of last year, U.S. hog producers cut breeding herds in the second half of 2008, "setting the stage for production declines in 2009," the U.S.D.A. said. The Dec. 1, 2008, hog inventory, at 66.7 million lbs, was down 2% from a year earlier, and the first December decline since 2002. U.S. pork production in 2009 was forecast at 23 billion lbs, down about 1% from the record large outturn of 23.4 billion lbs in 2008.

Somewhat offsetting lower production in 2009 was a forecast 14% reduction in exports from a record high 4,668 million lbs in 2008, again due to weaker economies in major importing countries.

Turkey meat production was forecast at 5.9 billion lbs in 2009, down 4% from 2008 and the first annual decline since 2004. A 10% drop in exports was expected to be more than offset by a 3% increase in total domestic consumption. Still, the U.S.D.A. forecast eastern region hen prices to average 83@88c a lb, down from a record high 87½c in 2008.

The U.S.D.A. projected 2009 broiler meat production at 35.4 billion lbs, down 3% from last year and the first decline since 1973.

"The sector continues to respond to poor returns experienced in 2008," the U.S.D.A. said. But production may turn higher in the fourth quarter of 2009 as lower feed prices and stronger broiler prices improve producer margins.

Broiler meat exports were forecast by the U.S.D.A. to total 6,050 million lbs in 2009, down 13% from a record high 6,962 million lbs in 2008, due to a stronger U.S. dollar and poor global economic conditions. Domestic demand also was expected to be hurt by the economy.

"Although demand is expected to be softer as a result of economic weakness, broiler prices may benefit from its value relative to beef prices," the U.S.D.A. said. The key 12-city wholesale broiler price was projected by the U.S.D.A. to average a record high 81@86c a lb in 2009, up from 80c a lb in 2008.

Table egg production was projected to increase marginally in 2009. The U.S.D.A. projected wholesale egg prices to average between $1.11@1.17 a dozen in 2009, down from a record high $1.28 in 2008, "due to weaker demand and gradually increasing production."

After making revisions to its February outlook numbers in last week’s monthly supply/demand report, the U.S.D.A. said, "Price forecasts for cattle, hogs, broilers, turkey and eggs are reduced, reflecting expected weakness in demand."

This article can also be found in the digital edition of Food Business News, March 17, 2009, starting on Page 28. Click here to search that archive.

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