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USDA Livestock, Dairy and Poultry Outlook


17 December 2011

US Beef Exports Exports Remain StrongUS Beef Exports Exports Remain Strong

US beef exports are expected to increase by 21 per cent in 2011.
Livestock, Dairy and Poultry Outlook

Summary

Beef/Cattle: Disproportionally large cow slaughter has kept average dressed weights lower during most of 2011 than if steers had constituted half or more of beef slaughter, as they typically do. Packer margins and high feed and feeder cattle prices are exerting downward pressure on fed cattle prices.

Beef/Cattle Trade: US beef exports are expected to increase by 21 per cent in 2011. Although US domestic beef supplies will be 5 per cent lower in 2012, exports should remain strong and stay about even with levels exported this year. As tight global beef supplies will continue into next year, US beef imports are expected to increase only moderately into 2012.

Beef/Cattle

Large Cow Slaughter Holding Average Dressed Weights Lower

Thus far in 2011, federally inspected cow slaughter has been large relative to the January 1, 2011 cow inventory, surpassing last year’s cow slaughter for the same period, which was also atypically large for its January 1 inventory. Year-to-date (through November 26, 2011), cumulative weekly federally inspected cow slaughter in 2011 was 4.3 per cent greater than for the same period in 2010. For beef cows, year-to-date slaughter in 2011 was 14 per cent above the same period in 2009, while dairy cow slaughter was only 2 per cent above 2009 slaughter. Because cows generally have lower dressed weights than steers, heifers, or bulls, these atypically large proportions of cow slaughter have resulted in lower average dressed weights for all cattle than trend lines and typical steer and heifer dressed weights and proportions of total slaughter would indicate.

Beginning with December 2009 prices for 750-800 pound Medium and Large No. 1 Oklahoma City feeder cattle prices that were 4 per cent above 2008 prices, feeder cattle prices have exhibited year-over-year increases every month. Increasingly scarce supplies of feeder cattle, especially heavier, older yearlings, make it likely that feeder cattle prices will continue high for the next 2 or 3 years until calf crops begin increasing year-over-year. Additional longer term support for feeder cattle prices will come as the expected lower corn and feed prices materialize in 2012-13.

March was the only month in 2011 that did not have higher year-over-year placements of feeder cattle under 600 pounds. This has resulted in an atypical inversion of price premiums between Central and Southern Plains fed cattle prices (See Cattle Sector Production Practices and Regional Price Differences, http://www.ers.usda.gov/Publications/LDP/2011/04Apr/LDPM2021/). January, July, and September are the only months in 2011 (through November) in which Texas-Oklahoma fed steer prices (35-65 per cent Choice) were higher than Nebraska fed steer prices (65-80 per cent Choice)..

Despite the high fed cattle prices, profit margins have stayed at breakeven levels or lower, in some cases much lower. In addition, cattle feeders continue to place expensive feeder cattle in anticipation of higher fed cattle prices in 2012, when supplies of fed cattle are expected to become scarce. However, fed cattle supplies will likely continue at or near current levels until sometime during the first half of 2012 because of the large numbers of lightweight feeder cattle that were placed on feed during the last half of 2011. These fed cattle will likely be marketed during the first half of 2012.

Packer margins are negative at a time when they typically recover. Negative margins have driven packers to reduce slaughter numbers somewhat and have dampened their willingness to continue to pay the record and near-record-high prices for fed cattle.

Beef/Cattle Trade

Foreign Demand for US Beef To Remain Strong into 2012

US beef exports for 2011 continue to remain robust. Twenty-one-per cent growth is expected this year as beef exports are forecast at 2.78 billion pounds. Key factors supporting the strong export market in 2011 are: (1) increased demand for US beef as disposable incomes of foreign consumers increase, (2) a worldwide multi-year decline in total cattle inventories and beef production, (3) an increased number of foreign countries purchasing US beef, and (4) a favorable exchange rate (with a relatively weaker US dollar making US product more attractively priced in global markets).

Through October, the largest increases in US beef exports have come from South Korea (+45 per cent), Japan (+31 per cent), and Canada (+33 per cent). Along with Mexico (+1 per cent), these countries are the largest importers of US beef, totaling almost two-thirds of the total US beef exported through October 2011. Notably, export totals to Hong Kong (+41 per cent), Egypt (+23 per cent), and Russia (+85 per cent) have also posted strong growth increases. Through October, the seven countries listed above imported just over 80 per cent of total US beef exports. In 2012, with US beef production expected to be down 5 per cent, total exportable supplies will be squeezed. The strength seen in the export market, however, is expected to continue into next year, including growth in Asian markets. Although there will be a tighter US supply, beef exports are expected to be about even with this year’s levels.

2012 Beef Imports to the United States Expected To Show Only Modest Recovery

US beef imports for 2011 are expected to be 11 per cent below year-earlier levels, at 2.05 billion pounds. Through October, imports from traditional major suppliers are down. Imports from Australia and Canada are down 25 and 22 per cent through October. These two countries have historically been beef suppliers to the United States, and, combined in the last 10 years, have averaged over 60 per cent of total US beef imports in the last 10 years. Imports from New Zealand (-3 per cent), Brazil (-53 per cent), and Uruguay (-11 per cent) are also lower year-over-year, while imports from Mexico (+49 per cent) and Central America (+29 per cent) through October are higher. The increase in federally-inspected plants in that country, as well as increased grain-fed beef production, are increasing the supply of higherquality, exportable beef. Tight global beef supplies, however, will continue into 2012 when US beef imports are expected to increase by 2 per cent to 2.09 billion pounds.

December 2011

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