|Per capita red meat and poultry consumption|
The U.S. Department of Agriculture’s mid-year cattle inventory report showed slower-than-expected herd rebuilding, despite sharply lower grain prices and improved pastures in much of the country.“The NASS Cattle report indicated little or no increase in replacement heifer inventories for either beef or dairy herds over July 1, 2012, inventories, when the last July 1 estimates were released,” the U.S.D.A. said in its Aug. 18 Livestock, Dairy and Poultry Outlook. “This was not expected, and it indicates that any herd rebuilding is pushed into the future.” The inventory report was not issued in July 2013 due to U.S.D.A. budget constraints.
That implies beef cow numbers will stay low longer, beef supplies will remain tight and beef prices will continue at or near record highs, although delayed herd rebuilding may keep nearby beef supplies a bit higher than would be expected if heifers were held back from feedlots. There were some mixed signals.
“At the same time, the proportion of heifers on feed is the lowest since July 2006, during the last upturn in total cow inventories,” the U.S.D.A. said. The department noted that Jan. 1, 2014, beef replacement heifer inventory was up about 4% from 2012 and up about 2% from 2013, but all other heifer categories were lower from both 2012 and 2013. The total U.S. cattle inventory on Jan. 1, 2014, was the lowest in more than 60 years.
In its latest Cattle on Feed report, the U.S.D.A. said there were 10.1 million cattle in feedlots on July 1, down 2% from a year earlier, with heifers accounting for 3.6 million head, down 5%. The U.S.D.A. said 1.46 million cattle were placed in feedlots during June, down 6% from June 2013, an indication of continued tight slaughter cattle supplies, although kill numbers still will show some seasonal increase in the fall.
The tightness in cattle numbers has been offset somewhat by heavier slaughter weights, the result of sharply lower prices for feed, mainly corn, which means beef production is not reduced as much as may be expected. The same is occurring in pork and poultry production.
“The forecast for total meat production in 2014 is raised from last month,” the U.S.D.A. said in its August World Agricultural Supply and Demand Estimates report. “Production is raised for beef, pork and broilers as lower feed prices encourage producers to raise animals to heavier weights. For 2015, lower feed costs are expected to lead to higher cattle, hog and broiler weights, but in the case of beef, reduced feedlot numbers are expected to lead to lower slaughter, more than offsetting any gains from carcass weights.”
Hog and poultry growers may adjust production much more rapidly than can cattle ranchers, thus taking advantage of changes in feed costs much sooner even if profit margins are favorable for all. Cattle have gestation cycles of nine months and typically have only one calf, compared to hogs that can have litters of about 10 pigs in a little over three months and chickens that lay an egg a day. It takes years to increase the cattle herd, months to grow more hogs and only weeks for chickens.
“To the extent that heifer retention occurs, it will further reduce feeder cattle supplies for placement on feed,” the U.S.D.A. said. “If heifers are not bred until next summer, it will be spring of 2016 before they calve, and 2017 before the bulk of those calves will be placed on feed and marketed as fed cattle. It will take several years of heifer retention to build up heifer/cow inventories to the point of significantly expanding beef supplies.”
There are other complicating factors for domestic beef supplies. The U.S.D.A. noted several beef packers have shut down or announced plans to shut down packing plants because of the lack of cattle, despite positive profit margins.
High beef prices haven’t slowed exports, which in the first six months of 2014 were up 5% from the same period last year. January-June beef shipments were up 57% to Hong Kong, 33% to Mexico and 21% to South Korea from the same six months in 2013.
“Despite higher prices for U.S. beef, export demand has remained resilient thus far in 2014,” the U.S.D.A. said. Full-year exports were forecast at 2,620 million lbs, up 1% from 2013, although exports in 2015 were projected to fall 3.6% due to lower U.S. beef production.
Domestically, the U.S.D.A.’s boxed beef cutout value hit a record high $263.66 a cwt on Aug. 1, up 40% from a year earlier, although prices have pulled back slightly since then. The value has been over $200 a cwt since the first week of January and has averaged near $234 a cwt for the year to date. For comparison, the cutout roughly averaged $195 a cwt in 2013, $190 in 2012, $180 in 2011 and under $160 from 2005 through 2010.
Tighter supplies will continue to restrict per capita beef consumption, regardless of price, and open the door for increased consumption of other proteins, mainly poultry. Although pork consumption also has been on the rise for years, largely due to its lower price relative to beef, pork production took a hit the past two years due to significant death loss from Porcine Epidemic Diarrhea (PEDv). Pork production is expected to rebound in the second half of 2014 and in all of 2015.
The U.S.D.A. forecast 2014 per capita beef disappearance at 54.2 lbs, retail weight, down 4% from 2013, and projected 2015 disappearance at 53.4 lbs, down 1% from this year.
“At $5.94 and $5.51 per lb, retail choice beef and all-fresh beef prices moved deeper into record territory in June,” the U.S.D.A. said. “However, there are some indications that consumers may begin to push back against the higher prices.”