Total livestock and poultry production rose less than1% in 2013 as modest declines in beef and pork production plus a sharper decline in turkey production were more than offset by higher broiler production, according to USDA data discussed at the Annual Ag Outlook Forum Friday in Arlington, Va.
Producers are now poised to expand to take advantage of moderating feed costs. However, non-feed cost factors will restrain expansion, resulting in total red meat and poultry production which will be very close to last year's levels and about 1% below the 2008 record.
"Declining cattle inventories and biological lags inherent in the production system restrain cattle expansion," USDA economist Shayle Shagam said at the forum. "The continuing spread of the Porcine Epidemic Diarrhea virus is expected to limit expansion in hogs. Turkey production is forecast to expand only in the second half 2014. That all means the broiler sector will carry the majority of growth in 2014 meat production."
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Demand is expected to be generally favorable in 2014 with an improvement in the domestic economy and continued strength in international markets. Cattle prices are expected to reach record levels. But rising pork and broiler production will pressure hog and broiler prices from last year's levels.
"The impacts of tight beef supplies and record prices will provide support to other meats, as consumers continue to seek value in lower-priced beef cuts and alternative proteins," notes Shagam. "Exports will expand for most meats. But increasingly tight supplies will constrain beef exports."
USDA forecasts the 5-Area steer price for 2014 to average $132 to $140 per hundredweight, up from 2013's record average of $125.89. As fed cattle supplies shrink in 2014, prices should continue to climb. But as retail beef prices rise, the threat of consumer resistance increases. Packer margins are generally weak and any resistance to high beef prices at retail will likely move downstream and limit what packers are willing to offer for cattle.
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Feedlot margins should improve. But margins will face pressure as feedlot managers are forced to bid up to buy feeder cattle. Those forces will limit flexibility in price negotiations.
Tighter beef supplies will likely push retail prices higher. But price hikes may be smaller compared to the past several years. Retail choice beef prices for 2014 are expected to about 2% to 3% above last year's record $5.29 per pound.
Hogs and Pork
Hog producers generally saw positive returns during much of the second half of 2013. Expectations of lower feed costs had set the stage for a strong expansion. However, the spread of the Porcine Epidemic Diarrhea virus through the U.S. herd will likely pull hog supply below earlier expectations.
PEDV has curtailed pigs per litter. Producers thus far have not dramatically expanded the number of sows farrowing to compensate for the losses in litter size.
Still, enough extra pork is coming to pressure prices. USDA's forecasts the national base, 51% to 52% lean, live equivalent, price average $61 to $65 per cwt. for 2014, down from last year's $64.05. Prices should average above 2013 in the first half of the year as supplies of market ready hogs are tightest. But as second half supplies approach year-earlier levels, prices are likely to drop below 2013 levels.
Retail pork prices for 2014 are expected to average 6% to 7% above below last year's record $3.61 per pound.
Sheep and lambs
The U.S. sheep and lamb inventory declined for an eighth straight year in 2013. The Jan. 1, 2014 inventory of sheep and lambs was 5.21 million head, down just over 2% from 2013. The breeding flock likewise declined 2% and the number of replacements lambs was almost 4% lower. The lamb crop declined over 2% in 2013. In 2013, commercial lamb and mutton production was virtually unchanged from 2012 despite a smaller 2012 lamb crop, as poor forge conditions and high feed costs encouraged producers to market animals in mid-2013.
Production in 2014 is forecast at 150 million pounds, down about 4% as market lambs on January 1 were down over 2% and producers may choose to hold back lambs to rebuild flocks.
The San Angelo Choice slaughter lamb price is forecast to average $157 to $165 per cwt for 2014, a sharp rise from $111.12 in 2013 and possibly eclipsing the 2011's record of $161. Prices began to rise in the second half of 2013 as lighter weight sheep were marketed. Prices are expected to average above year-earlier through 2014 as supplies of marketable lambs remain tight and demand improves.
For 2014, broiler meat production is forecast 3% higher at 38.9 billion pounds. Producers responded to higher broiler prices in 2012 by beginning to up production in late 2012. However, high feed prices in late 2012 and early 2013 kept the expansion in check. Production rose more rapidly in the second half of 2013 as feed prices declined.
The National Composite wholesale broiler price is forecast to average 94 cents to $1.01 per pound in 2014, compared with an average of $1.00 in 2013.
Despite higher production, tight supplies of beef and improving economic conditions are likely to support stronger demand for broiler meat. Increased demand for broiler meat is likely to be manifested in higher retail prices. For 2014, composite retail broiler price is forecast to average about 1% higher than 2013's $1.96 per pound.
Turkey production for 2014 is forecast to rise about 1% to 5.85 billion pounds. Production has been consistently below year-earlier since August. Despite declining feed prices, weak turkey prices have likely delayed expansion plans.
USDA forecasts the National turkey hen price to average $1.00 to $1.06 per pound, compared to an average of $1.00 in 2013.
Catch up on more stories from USDA's Ag Outlook Forum:
Solid Gains in U.S. Agricultural Trade Expected This Year
USDA Projects 2014 Crop Prices Mostly Lower Than 2013
Slumping Feed Costs Improve U.S. Livestock Profit Prospects