Challenging Year for Livestock Production

The livestock and poultry industry in the US will be increasingly challenged this year by rising feed prices that drive up costs and lower returns and by consumers confronted with uncertain economic conditions.

25 April 2008

5 minute read

Speaking at the US Agricultural Outlook Forum earlier this year Joel Greene, the livestock analyst with the World Agricultural Outlook Board of the USDA, said that there will be a record 93 billion pounds of red meat and poultry to move through domestic and international channels this year.

He said that the country's economic growth was at its weakest during the first half of the year and is expected to fall by between one and two per cent over the year.

He said he expected to see a change in consumer patterns as the weaker economy produced reduced confidence. This could see US consumers eat out less and turn to cheaper cuts of meat.

While the slowing in economic growth is expected around the world Mr Greene said that internationally it is expected to be about three per cent.

"US red meat and poultry exports will continue to be supported by a weak US dollar, and are expected to top 12 billion pounds this year," Mr Greene told the forum.

"Returns for livestock and poultry producers will fall during the year, and as a result production growth for all red meat and poultry slows later in the year."

He said that as carcase weights have increased in recent years, but this year the rise in weights is not expected to be as great as pig and poultry producers in particular strive to reduce feed costs.

Cattle producers are expected to leave cattle on grass longer if pasture conditions permit in order to offset some of the increased feed costs.

Mr Greene said that prices for cattle, hogs, and poultry in 2008 are expected to decline, but retail prices for beef and pork are expected to rise, although broiler and turkey prices could be slightly lower.

Total US Red Meat and Poultry Production

Halt to Herd Expansion

Mr Greene said that in the cattle sector, the expansion of the herd that started in 2004 has stopped and the annual Cattle report estimated that the number of cattle and calves on 1 January this year was slightly down by 0.3 per cent at was 96.7 million head.

The beef cow herd was the smallest since 1991 standing at nearly 32.6 million head, about one per cent below a year ago.

The effects of drought in the south east of the US meant that the numbers of cows slaughtered last year was high and numbers fell by 338,000.

"There is little indication of expansion in the cow herd this year.," Mr Greene said.

"Total cow slaughter is expected to remain relatively strong at nearly 5.3 million head. The Cattle report estimated that producers will retain about four per cent fewer replacement heifers for the beef cow herd this year, and the number of beef heifers expected to calve during 2008 was also four per cent lower."

The 2007 calf crop was 37.2 million head, slightly smaller than the 2006 calf crop, which was revised downward by 48,000 head. The calf crop is expected to fall this year and again in 2009 because of the lower numbers of cows and calves.

Because of the length of time it takes to grow calves on for production, it is not expected that calf crop dip will be turned around until 2011. Heifers that are retained this year from last year's calf crop will be bred this year, calve in 2009, and then the calves may not be available for slaughter until 2010 and into 2011.

Beef production this year is expected to fall slightly to 26.3 billion pounds as the numbers of cattle available for slaughter are expected to be tight.

The high cost of wheat had distorted the market last year with many animals being held back until the end of the year.

Decline in Beef Cow Herd and Calf Crop

Beef Exports Forecast to Rise

US beef exports are forecast at about 1.7 billion pounds for 2008, which will be 17 per cent up on 2007, when exports stood at 1.4 billion pounds.

Mexico and Canada were again the leading markets for US beef in 2007.

Exports to Japan more than tripled to 159 million pounds, but shipments are still limited to boneless beef from cattle 20 months of age or under.

In 2008, Mexico and Canada will again be leading markets and shipments to Japan are expected to gradually increase. No exports were forecast to South Korea for 2008 at the beginning of the year pending an agreement between the United States and South Korea for beef access that accepts international standards (an agreement that has just been made).

US beef imports are forecast to reach 3.1 billion pounds in 2008, a rise of about two per cent on 2007.

Mr Greene said that imports fell last year because of the rise in cow slaughter.

"The weak US dollar put additional downward pressure on imports as imported beef became less competitively priced," he said. Imports from Australia, the source for about one third of US beef imports, were unchanged from the previous year and shipments from Canada and New Zealand fell.

Imports from Uruguay rose by 16 per cent to 355 million pounds and there were smaller increases from Brazil.

"The BSE Minimal Risk Region rule 2 was implemented in November 2007 and allowed the import of cattle over 30-months of age if born after March 1, 1999, and the import of beef from cattle over 30-months of age," Mr Greene said.

"Cattle imports from Canada increased during the last two months of 2007 but beef imports remained below 2006 levels. Exchange rates and available exportable beef supplies are likely to keep total imports to a moderate pace this year."