Livestock, dairy & poultry overview – beef supplies forecast to rise in 1992, likely to continue into 1993; hog prices drop after short increase in February, 1992, and producer returns expected to stay below total costs throughout ye

Livestock, dairy & poultry overview – beef supplies forecast to rise in 1992, likely to continue into 1993; hog prices drop after short increase in February, 1992, and producer returns expected to stay below total costs throughout year; egg prices lower for spring 1992 than previous year with increase in table-egg production up 1%; broiler production expansion to slow down from 7% growth of previous year; turkey supplies increase after 14% decline in previous year reflecting decrease in consumer demand – U.S. Dept. of Agriculture, Economic Research Service Report

Beef supplies are expected to increase for at least the next several years. The current cycle appears headed toward modest expansion, perhaps similar to the mid-1960’s when little or no liquidation phase occurred. The expansion is likely to continue in 1993, with output exceeding population increases for the first time in 6 years.

After averaging $37 per cwt in January, hog prices rallied briefly in February, averaging $40 per cwt. But a continued sluggish economy, pickup in slaughter rate, and weakening beef prices dampened the rally. By the end of February, prices were below $40 per cwt, and are expected to remain at that level until slaughter rates drop seasonally in mid-to late spring.

Consumers will find plenty of eggs for the Easter season, with prices lower than a year ago. And second-quarter broiler production will likely increase to around 5.2 billion pounds, but lagging the robust 7-percent growth of a year earlier. [For the latest estimates for livestock, dairy, and poultry markets, see tables 10-16.]

Beef Output To Rise In 1992

Beef supplies are expected to increase for at least the next several years. The current cycle appears headed toward modest expansion, perhaps similar to the mid-1960’s when little or no liquidation phase occurred. The expansion is likely to continue in 1993, with output exceeding population increases for the first time in 6 years.

Beef production is expected to rise 2 percent in 1992. Fed cattle marketings, after a slight dip in 1991, are expected to rise 1 to 2 percent this year, and cow slaughter may rise nearly 2-3 percent from last year’s cyclical low.

Nearly all of the increase in cow slaughter will be older cows that were kept to give birth one more time. Cattle weights are expected to average near or slightly above last year’s record. The largest year-to-year production increase is likely in the first half of 1992, and near to slightly above a year earlier during the second half.

Several factors will contribute to the expanding beef output next year.

* a buildup in the cattle inventory and a larger calf crop are expected this year, increasing the number of cattle available for slaughter;

* a slower pace of herd expansion means more heifers are available for placement in feedlots and eventual slaughter;

* dairy calves–previously slaughtered for veal–are being placed in feedlots in increasing numbers; and

* the gradual shift toward heavier slaughter weights is expected to continue.

Boxed beef (wholesale) prices rose over $10 per cwt from December, to around $121.50 by February, the highest since late spring 1991. However, March prices were erratic, ranging from $117 to $122 a cwt. Normally, rising wholesale prices would put upward pressure on retail prices. While retail prices are likely to rise to the mid-$2.80’s per pound, additional increases are unlikely given the large meat supplies and the economy’s doldrums. Retail prices for Choice beef in February averaged $2.82 a pound, well below the $2.92 of a year earlier.

After rising slightly in December, the farm-retail spread narrowed in January and February. Most of the decline in the spread occurred at the wholesale-retail level; while the farm-wholesale spread declined 9 percent from December to February, the wholesale-retail spread dipped by more than 16 percent.

Hog Price Rally Is Short-Lived

After averaging $37 per cwt in January, hog prices rallied briefly in February, averaging $40 per cwt. The rally was due to a seasonal drop in slaughter rates, speculation about increased exports to former Soviet republics, and some spillover effect from higher beef prices. But a continued sluggish economy, pickup in slaughter rate, and weakening beef prices dampened the rally. By the end of February, prices were in the high $30’s per cwt, and are expected to remain at that level until slaughter rates drop seasonally in mid- to late spring. The brief price rally improved producer returns somewhat, but receipts will probably remain below total costs through most of the year. The low returns are expected to prompt producers to cut breeding inventories by late 1992. Increased culling and reduced retention of female stock will also help produce record output in 1992 and place additional supplies on the market into 1993. If producers do wait until late 1992 to cut back breeding inventories, year-over-year declines in pork production would not show up until late 1993.

For this year, production is expected to be up 7 percent, setting a record. Expanding pork supplies at sharply lower prices will ensure that pork remains attractive to consumers. Retail prices in February averaged $2 a pound, 7 percent below a year earlier. Retail prices for the year are expected to decline 8 to 10 percent from 1991.

U.S. pork imports totaled 775 million pounds in 1991, with most major sources registering declines. With large Canadian pork supplies, and a near doubling of the countervailing duty on Canadian hogs exported to the U.S., imports of pork from Canada were expected to increase. However, pork imports remained low while live hog imports from Canada increased over 1990 levels. Reduced imports from Denmark and Poland throughout most of the year, together with little increase in canned product imports for the holidays, put U.S. pork imports 14 percent below 1990.

Although Poland, Denmark, and Canada are all expected to increase pork production this year, any rise in U.S. pork imports is likely to come from Canada. Poland can ship only canned products, and faces problems revitalizing its food processing industry, while Denmark appears to be focusing on the EC for sales expansion. U.S. imports in 1992 are expected to increase slightly over 1991.

U.S. pork exports increased 19 percent in 1991, to 283 million pounds. Sales to Japan–which generally account for about half of U.S. pork exports–were off 2 percent during the year. The U.S. also lost some market share as Japan boosted imports an estimated 15 percent, purchasing from other suppliers. U.S. exports did get a boost, however, from a 114-percent increase in sales to Mexico, and a 19 -percent hike in sales to Canada.

The pork export outlook for this year appears favorable, up a potential 8 percent over last year. Mexico is expected to remain a strong market for U.S. pork in 1992. Japanese production is expected to decline further, and lower U.S. prices may help retrieve some of the Japanese market share in 1992. Indications are that Taiwan will increase production in 1992 and will continue to be a major player in the Japanese market.

No Hunting Needed For Easter Eggs

Consumers will find plenty of eggs for the Easter season, with prices lower than a year ago. First-quarter table-egg production increased about 1 percent from a year earlier, while production during the second quarter is likely to be only fractionally above last year. Producers will likely begin to reduce the table-egg flock after Easter in response to lower net returns. For the entire year, table-egg production is expected to come in just under 1991’s 4.95 billion dozen.

About 60 percent of U.S. eggs are produced in 10 states. New summary data for 1991 show that California remains the largest producer, with nearly 11 percent of the nation’s total. The next four largest producers are Indiana, with 7.7 percent of U.S. output, Pennsylvania with 7.4 percent, Ohio with 6.7 percent, and Georgia with 6.2 percent. Rounding out the top 10 states are Arkansas, Texas, North Carolina, Minnesota, and Florida.

The usual seasonal wholesale price strength associated with Easter buying is spread over two quarter this year, as Easter occurs in late April, 3 weeks later than last year. Second-quarter retail prices are expected at around 89 cents a dozen, compared with 93 cents a year ago. First-quarter retail prices averaged in the low 90’s, and well below last year’s $1.05. Unless price strength appears toward the end of the second quarter, average net returns for 1992, although positive, are likely to be the lowest since 1989. The low returns reflect higher feed costs in the first half of 1992 and lower egg prices during the year.

Exports in 1992 are expected to remain strong, but slightly below last year. Modestly lower U.S. prices will help preserve a competitive position in most markets. The level of Export Enhancement Program (EEP) sales will remain important for 1992 exports, however. More than 12 percent of last year’s exports of table eggs were EEP sales–twice the percentage of 1990. Almost 75 percent of the EEP sales were to Hong Kong, while the rest were to the United Arab Emirates and Oman.

Including the shell equivalent of egg products, total egg exports in 1991 rose 54 percent from the previous year, and were the highest since 1982. Japan was the leading market, taking more than 12 percent of U.S. egg exports, mostly egg products.

Broiler Producers Slowing Growth

Second-quarter broiler production will likely increase to around 5.2 billion pounds, lagging the robust 7-percent growth of a year earlier. A general indicator of growth during the second quarter is the 4-percent-larger broiler-type hatching egg flock on February 1, 1992. Smaller increases are expected in the hatchery supply flock through July 1992, reflecting producers’ caution during the second half.

Broiler producers are prompted to slow expansion in 1992 with last year’s net returns down from year-earlier levels. Production is expected to increase 4-5 percent from 1991, compared with last year’s 6-percent rise. While first-quarter output rose 6-7 percent from a year ago, February chick placements are pointing to about a 4-percent production increase in April.

Wholesale broiler prices during the first quarter averaged about 50 cents a pound, down 1-2 cents from a year ago. Second-quarter prices will likely hold steady from the first quarter, but average 2-3 cents lower than last year. Slightly weaker retail prices are also expected for whole broilers in 1992, with first-half prices likely in the high 80’s.

Increased supplies of poultry and red meats will continue to pressure wholesale broiler prices during 1992. Prospects of a flat economy and lower broiler exports will help pull broiler prices slightly below a year earlier.

Expected year-to-year declines in broiler prices and higher feed costs through the third quarter may bring 1992 net returns to their lowest average in several years. Net returns on a whole-bird basis will probably remain above breakeven for the year, but negative net returns are likely in some months.

Competitive prices for dark meat parts will continue to help U.S. exports in 1992, but broiler exports are expected to be lower than 1991. Prospects look favorable in most markets, but financial uncertainties still surround the outlook for exports to the former Soviet Union. The expected decline in exports there will contribute to a small reduction in overall exports, from 1.26 billion pounds in 1991 to around 1.2 billion.

Most of this year’s growth in U.S. broiler exports will likely be in the Pacific Rim countries, which are enjoying healthy economies and where poultry meat consumption is posting steady increases. About half of U.S. broiler sales are expected to be made to these countries. Among other markets, larger sales are also likely to Mexico, Canada, the Caribbean, and the Middle East. Exports of broilers to the Middle East will be mostly whole birds under EEP.

Turkey Stocks Rebound After Brief Respite

After declining 14 percent from a year earlier by the end of December, turkey stocks rose sharply during January. On February 1, stocks reached 325 million pounds, nearly 8 percent above a year earlier. The large increase was in whole birds–other turkey stocks rose only moderately. A 4-percent increase in January production compared with a year earlier partly contributed to the stock upturn.

The stock increase also indicates that turnkey consumption dropped early this year, compared with early 1991. Large supplies of competing meats, especially lower priced pork, were important factors in the consumption slowdown. Another factor probably was the large purchases of bargain-priced turkeys in late 1991. Consumers may have stored a larger quantity of birds in home freezers, slowing purchases early this year.

Production growth in the first quarter is estimated at 3-4 percent, slightly slower than last year. Second-quarter production will be about 2 percent above a year earlier, considerably less than the over 5-percent growth last year.

Wholesale turkey prices have begun to move up slightly, following a normal seasonal pattern. But prices remain low, and further gains will depend on a pickup in demand, particularly for whole birds during the Easter season. Last year, Eastern region hen prices rose 6 percent in March, prior to Easter. This year, turkey will be competing with larger supplies of lower priced hams, likely resulting in wholesale turkey prices slightly below a year earlier.

A strong export picture is helping to keep prices from drifting lower. Turkey exports have recently been running at 3 percent of production, compared with about 1.5 percent a year ago. In 1991, Mexico purchased about 60 percent of U.S. turkey exports, and the Pacific region took about 20 percent. Turkey sales have benefited from liberalization of Mexico’s economic policies, including reduction of trade barries. Mexico’s turkey imports skyrocketed between 1990 and 1991, from 15.7 to 64 million pounds.

Per capita consumption in Mexico is much lower than in the U.S.–0.96 pounds compared with 19 pounds–but there is potential for further growth in the Mexican market, where turkey thigh meat can be used in many ways, including in traditional dishes.

COPYRIGHT 1992 U.S. Department of Agriculture

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