USDA Livestock, Dairy and Poultry Outlook
16 March 2012
USDA Livestock, Dairy and Poultry Outlook March 2012
Beef cow slaughter may be declining, and heifer retention to replace cows
may be in early stages. Cattle feeding margins are improving for the short term, but
packers are likely still seeing red. Retail prices may also be encountering some
consumer resistance. 
Beef/Cattle
Early 2012 Weather Improved Over Last Year
The apparent transition of La Niña to a normal weather pattern should mean a
lessening of the drought conditions in the Southern and Southwestern United States,
but drought conditions persist in these areas and farther south in Mexico. The result
is continuing year-over-year increases in U.S. feeder cattle imports from Mexico.
Those increases were 22 percent through March 10, 2012 (cumulative total of
weekly USDA, Agricultural Marketing Service (AMS) data, AL_LS625). A more
normal corn crop is anticipated this year, which should help reduce cattle feeding
costs this fall and in 2013.
As often happens when feeder cattle prices reach high levels, veal calf slaughter
declined rapidly during the last 2 months. December 2011 and January 2012
exhibited year-over-year declines of 6 percent overall, with the largest declines in
bob vealers and non-formula-fed 150- to 400-pound calves. Even though veal
production accounts for only about half of 1 percent of total U.S. beef and veal
production, these declines reflect the value of live dairy calves at today’s feeder calf
prices, which are more than 20 percent higher year over year.
Total cow and bull slaughter continues to account for over 20 percent of federally
inspected slaughter, but it appears to be declining from higher shares observed last
year and earlier this year (USDA, AMS, Daily National Carlot Meat Reports). A
decline in beef cow and bull slaughter this time of year is consistent with seasonal
patterns, but may also indicate an end is in sight to the heavy cow slaughter of the
last few years and to the liquidation phase of the current cattle cycle.
There have also been reports of feeder heifers selling at premiums to same-weight
steers. If the premiums were not isolated incidents, accounted for by differences in
quality or body condition, this could be a sign that heifer retention for cow-herd
replacements is underway. If heifer retention increases significantly—barring
droughts or other abnormalities—the smaller numbers of heifers available for
feeding would exacerbate the shortage of feeder cattle for placement in feedlots that
is expected for several years, perhaps into 2015 or beyond.
Fed cattle prices in the upper $120s per cwt and breakeven levels in the $130s will
likely result in negative margins for cattle feeders for the next few months. With
feeder cattle prices escalating more rapidly than fed cattle prices, breakeven levels
may also continue to climb upward. Breakeven levels for cattle to be marketed in
May 2012 are already projected in the $136-plus per cwt range.
Fed cattle prices at current levels imply retail prices which will average above the
most recent $5.09 per lb for January 2012 Choice retail beef. It remains to be seen whether
retail consumers will curb their demand at these levels; there are signs that these
high prices are already prompting resistance.
Live and dressed weights of fed cattle are increasing counter-seasonally due in part
to the favorable weather for feeding cattle during the last several months. Another
factor is likely the extra weight gain from extra time on feed due to reduced steer
and heifer slaughter as packers try to bring down fed cattle prices.
Beef/Cattle Trade
U.S. Beef Exports Fractionally Lower in 2012, Imports 9 Percent Higher
U.S. beef exports for 2012 are forecast at 2.76 billion pounds, fractionally below the
2011 export level. Quarterly growth in exports is anticipated in the first half of the
year, with growth levels diminishing as the year progresses and domestic beef
supplies become tighter. Growth of over 8 percent is anticipated in the first quarter
of this year, with 685 million pounds exported. Export levels in the second quarter
are expected to total 735 million pounds, or nearly 5 percent higher than the same
period last year. Total U.S. beef production levels are expected to be 1.7 and 2.2
percent lower in the first and second quarters of this year, respectively. In the
second half of the year, however, beef production will be 5.3 and 8.5 percent lower
for the third and fourth quarters, and beef exports are expected to be 9 and 6 percent
lower, respectively, in those quarters.
Imports of beef to the United States are expected to post substantial growth (9
percent) above the historically low import level of 2011; the forecast is for 2.2
billion pounds of beef to be imported this year. Quarterly growth estimates range
from 4 to 15 percent, with the strongest growth expected in the first quarter of this
year. However, import levels for the first quarter in 2011 were among the lowest on
record in the past 2 decades. Strong growth is also anticipated for the final quarter
of 2012.
Dairy
Milk Prices Lowered Further; Milk Production Expected To Exceed Earlier Forecasts
Feed prices are expected to be higher during 2012 than last year. The corn price is
expected to average $5.90 to $6.50 per bushel for the 2011/12 crop year, an increase
from the $5.18 average in 2010/11. Soybean meal prices are forecast higher than in
February at $310 to $340 per ton, but lower than the $346 posted in 2010/11. The
increase in the soybean meal price forecast this month is due to reduced supplies
from South America. The higher feed prices expected this year will continue to
pressure the milk-feed price ratio. The preliminary February milk-feed price ratio
was 1.58, well below 2.01 posted in February 2011. This producer profitability
indicator is unlikely to improve as the effect of higher feed prices will be
exacerbated by forecast lower milk and dairy product prices this year.
The February Milk Production report showed January milk production 3.4 percent
above January 2011 as both milk cow numbers and output per cow were above
expectations (USDA, National Agricultural Statistics Service). Prices for
replacement heifers, which will enter the herd during 2012 and into mid-2013, were
also above expectations, suggesting that there is demand for dairy replacements and
further expansion. Based on these facts, February’s forecast cow numbers were
increased this month to 9.2 million head for the year and production per cow was
raised to 21.7 million pounds. Most of the gain in cow numbers is expected to
come in the first half of 2012. The relatively mild winter temperatures in most of
the United States were ideal for milk production, boosting yield per cow in the first
half of 2012. However, weaker producer returns are expected to lead to herd
contraction and lower milk per cow in the second half of the year. Milk production
is forecast at 199.7 billion pounds this year, an increase over 2011 and a slightly
higher than February’s forecast.
Milk equivalent imports on a fats basis are forecast at 3.3 billion pounds and at 5.1
billion pounds on a skims-solids basis, both unchanged from February. Export
forecasts likewise remain unchanged from February at 8.6 billion pounds and at
32.3 billion pounds on a fats and a skims-solids basis, respectively. Exports of most
dairy products remain steady; however, butterfat movement is weak.
Fats basis ending stocks were raised this month and will end 2012 higher than in
2011. Currently large stocks of butter and higher milk production account for the
forecast. Skims-solids stocks will end the year very close to 2011 ending stocks.
Lower butter/powder values in the first half of 2012 could draw milk into cheese
production, limiting the growth of nonfat dry milk (NDM) stocks and aiding the
drawdown in fat basis stocks over the course of the year.
Prices for cheese, butter, NDM, and whey, were lowered this month. Expanded
milk production, and slightly lower than earlier forecast economic growth is
expected to pressure prices. This month, annual cheese prices are forecast at $1.600
to $1.660 a pound. Butter prices are projected at $1.510 to $1.600 a pound for the
year. NDM prices are forecast at $1.345 to $1.395 for the year and whey prices,
which had bucked the previous trend toward lower product prices, are now forecast
lower this month at 57.0 to 60.0 cents a pound, but are still expected to finish the
year above 2011 prices.
Lower dairy product prices resulted in lower milk prices for March than in
February. The Class III price is projected at $16.35 to $16.95 per cwt. The Class
IV price forecast is reduced to $15.85 to $16.55 per cwt, and all milk is lowered to
$17.60 to $18.20 per cwt.
Hogs/Pork
Solid Domestic Pork Demand Continues
Through early March, production and most price data suggest that solid pork
demand continues, even in the face of no-nonsense increases in hog slaughter and
pork production in January and February. Average prices of live equivalent 51-52
percent hogs were $62.18 per cwt in January (11.9 percent above January 2011) and
$63.94 per cwt (3.8 percent above February 2011). Retail pork prices in January
averaged $3.50 per pound, 7.8 percent greater than a year ago. January retail pork
prices were accompanied by data indicating a record-high wholesale-to-retail spread
(202.6) suggesting that retailers were successful in shifting at least part of their 1.1
percent year-over-year higher wholesale pork costs to retail consumers, who
appeared willing and able to pay higher retail prices for pork.
Solid domestic pork demand is further reflected in quarterly disappearance
estimates. USDA supply forecasts for the first quarter of 2012 point to a 2-percent
increase in total pork supply. Accounting for estimates of first-quarter exports and
ending stocks leaves total domestic pork disappearance 1.4 percent ahead of firstquarter 2011. So far in the first quarter, then, U.S. consumers appear to be paying
more for larger quantities of pork. First-quarter per capita pork disappearance is
forecast at 11.5 pounds per capita, 0.49 percent larger than a year ago.
As a counterbalance to higher hog prices and indications of continued strong
domestic pork demand, USDA data shows that pork stocks are building ahead of
year-ago levels and that wholesale values of most pork cuts have traded at belowyear-ago levels since late January. Stocks of pork at the end of January were 584
million pounds. While significantly higher than a month earlier, the year-over-year
increase in total pork stocks was about the same as in January 2011. The February
wholesale value of the pork carcass—$84.44 per cwt—was almost 5 percent below
a year ago. However, good availability of pork cuts and relatively low prices are
expected to attract buyers’ attention, given that both beef and broiler production and
domestic disappearance are expected to be year-over-year lower for most of 2012.
With retail beef prices expected to remain over $5 per pound in 2012, and with
2012 composite chicken prices expected to average almost 5 percent above last
year, pork as an alternative animal protein looks better and better.
First quarter prices of live equivalent 51-52 percent lean hogs are expected to
average $63-$64 per cwt. For 2012, prices will likely average $63-$67 per cwt.
USDA/NASS will release the Quarterly Hogs and Pigs on March 30, which will
report March 1 swine inventories, as well as producer’s farrowing intentions.
2012 Pork Exports Off to a Strong Star
Pork exports in 2012 started off with a bang: January exports of 502 million pounds
were 36 percent above a year ago. See the table below, which sets out the top five
foreign destinations for U.S. pork exports in January. With good reason, U.S. pork
exports to China garner much attention because of the country’s population and its
potential as a buyer of U.S. pork products. The figure shows U.S. exports to
China since January 2011. The data in the figure show an export peak in November
2011 and an ongoing decline, as the small number of relatively large Chinese orders
placed last year are filled and shipped.
The export data in the table show that China was the third-largest foreign
destination for U.S. pork in January. These data also suggest that exports to Japan
and Mexico helped drive January U.S. export numbers into the stratosphere. It is
worth noting that shipments to South Korea were more than 31 percent over year
ago, and exports to Canada increased 51 percent. South Korea is still recovering
from foot and mouth disease problems, with the Government of South Korea
extending zero-duty tariff rate quotas for certain cuts during the first quarter of
2012. Canada’s strong dollar is likely fueling Canadian demand for relatively
cheap U.S. pork products.
Poultry
Broiler Production Falls Slightly in January, First-Quarter Estimate Revised Upward
Broiler meat production for January 2012 was reported at 3.09 billion pounds, down
only 1 percent from the previous year. The decrease was the result of small decline
in the number of birds slaughtered and the average live weight at slaughter. The
decline in the number of birds slaughtered was less than expected. The total
number of birds slaughtered was 706 million, down 1 percent from January 2011,
and the total liveweight of broilers at slaughter declined by 1 percent. The average
liveweight at slaughter was 5.84 pounds, a decline of .01 pounds per bird (0.3
percent) from the previous year.
The broiler meat production estimate for first-quarter 2012 was increased by 150
million pounds to 8.85 billion pounds, a decrease of 5 percent from a year earlier.
This is the result of January’s stronger than expected broiler meat production and an
assumption that the slaughter trend will carry into February and March. Some of
the production decrease is expected to come from a smaller number of birds
slaughtered, but part of that decrease is expected to be offset by small gains in
average weights at slaughter throughout the remainder of the first quarter and into
the second. Based on the expectation of slightly higher weights, the meat
production estimate for the second quarter was also increased and now is expected
to total 9.05 billion pounds.
In the NASS Poultry Slaughter 2012 Summary, there were some revisions to broiler
meat production and slaughter numbers for 2010 and 2011. The revisions for 2010
were very small, but the revisions to 2011 production added about 25 million
pounds to overall production and boosted the 2011 total to 37.2 billion pounds.
Weekly estimates of broiler eggs in incubators and chick placements from the
NASS Broiler Hatchery Report point toward continuing decreases in the number of
birds available for slaughter. Over the last 5 weeks (February 4 to March 3), the
number of eggs placed in incubators has averaged 195 million, 5.5 percent below
the same period the previous year. The incubation period for broiler eggs is 3 weeks
and then chicks are placed for growout. Over the last 5 weeks, the number of
chicks placed for growout (an average of 162 million per week) has been 3.9
percent lower than the previous year. Chicks placed for growout in early- to lateMarch will likely be ready for slaughter in late April to mid-May based on an
average 7- to 8-week growout period.
With lower production in fourth quarter 2011 and lower production forecast for
first-quarter 2012, wholesale prices for most broiler products are expected to
continue to gradually increase. Over the first 2 months of 2012, the 12–City whole
broiler price averaged $0.84 per pound, up almost 15 percent from the same period
in 2011, and by the beginning of March prices had risen to over $0.90 per pound.
Prices for other broiler products are also higher. Prices for boneless/skinless breast
meat in the first 2 months of 2012 averaged $1.27 per pound, up almost 10 percent
from same period the previous year. Prices for rib-on breasts averaged $1.00 in
January and February, up 20 percent, and like boneless/skinless breasts prices,
prices for rib-on breasts have been moving higher for the last several months. Even
though a large decline in exports is expected in first-quarter 2012 compared with
fourth-quarter 2011, prices for leg quarters averaged $0.53 per pound in the first 2
months of 2012, up sharply (41 percent) from the same period in 2011. Even
broiler wing prices have remained strong, falling only slightly from their normal
seasonal high in late January. During January and February of 2012 the averaged
price for broiler wings was $1.83 per pound, a sharp increase of almost 90 percent
from the same period in 2011.
The NASS Annual Cold Storage Report contained only minor adjustments to
ending stocks for 2011, which are estimated at 590 million pounds, 24 percent
below those of the previous year. The decline in stocks was the result of both lower
production in the fourth quarter and continued strong exports. Lower broiler meat
production over the second half of 2011 pushed broiler stock below year-earlier
levels starting in August 2011 and continuing through January 2012.
Stocks of broiler products at the end of January 2012 were 576 million pounds, 22
percent lower than the previous year. Stocks of almost all broiler products were
well below their previous-year levels. The only exceptions were stocks of
drumsticks. Stocks of drumsticks totaled 25.7 million pounds, over 50 percent
higher than the previous year. Although paws are not included in the broiler meat
supply and use calculations, stocks of paws totaled 32.2 million pounds and were 21
percent above year-earlier levels. Stocks of paws have been higher due to lower
exports as duties imposed by China, the only main export market, have increased
prices. With very strong exports in the second half of 2011, stocks of leg quarters
totaled only 83 million pounds, down 36 percent from January 2011. Ending stocks
for first-quarter 2012 are forecast at 550 million pounds, a decrease of 17percent
from the previous year. Ending stocks are expected to be below year-earlier levels
for the first three quarters of 2012 and move slightly higher in the fourth quarter as
production begins to increase.
Broiler Exports Totaled 506 million Pounds in January
Broiler exports in January were 9 percent higher than the previous year, totaling 506
million pounds. Most of the increase was due to higher shipments to a number of
countries that are normally small importers. Exports to Mexico continue to be very
strong, totaling 88.7 million pounds 4.5 percent higher than a year earlier.
Shipments were also up strongly to Taiwan and Cuba, totaling 30.2 and 27.0
million pounds, respectively. The gains to these countries were partially offset by
declines to several countries such as Hong Kong, Angola, and Guatemala.
In 2011, total U.S exports of broiler products totaled 6.99 billion pounds, 3.3
percent higher than the previous year. Most of the growth was due to record
shipments in third-quarter 2011, totaling fractionally less than 2 billion pounds.
Although shipments to Canada during 2011 rose by 12 percent, much of the growth
in shipments was to Asian countries. Exports to the Philippines, China, Korea,
Hong Kong, and Japan all increased more than 20 percent from the previous year,
totaling almost 1.2 billion pounds or around 17 percent of all broiler exports.
Although exports to Mexico rose by only 4.2 percent, the gain was enough to
increase shipments to that country to over 1 billion pounds.
Turkey Production Forecast for 2012 Increased
Hatchery data showed that the number of poults being placed during the second half
of 2011 was higher in 4 out of 5 of the last months and that it was again higher (4.6
percent) in January. Poult placements are expected to remain above the previous
year as the number of turkey eggs placed in incubators has been higher than the
previous year at the beginning of both January and February. With expected
increases in poult placements, the turkey meat production estimates for 2012 was
increased somewhat in all four quarters with the total for 2012 rising to 5.92 billion
pounds, up 2 percent from 2011. First-quarter 2012 turkey meat production is now
forecast at 1.4 billion pounds, up slightly from the previous year, with stronger
increases expected later in the year as turkey producers raise production in response
to the strong prices for whole birds that existed throughout 2011 and into 2012. The
higher production is expected to come primarily from more birds being slaughtered,
but a small increase in average liveweight at slaughter is also expected.
Turkey meat production in January 2012 totaled 477 million pounds, an increase of
3 percent from the previous year and January 2011 was over 9 percent higher than
January 2010. The increase in production was the result of both a higher number
of turkeys being slaughtered (up 2.9 percent) and a small increase in the average
weight of birds at slaughter to 30.9 pounds (0.3 percent higher). Year-over-year
increases in production are expected to continue in both February and March, with
production during first-quarter 2012 expected to be about 1 percent higher than a
year earlier. Growth in turkey meat production is expected to continue throughout
the remainder of 2012 as higher prices provide the incentive for higher production.
Turkey Stocks 17 Percent Higher
The estimate of turkey stocks at the end of January 2012 was 298 million pounds,
up 17 percent from the previous year. The increase in cold storage holding stems
from higher holdings in a number of the categories reported for turkey. At the end
of January 2012, whole birds stocks were estimated at 109 million pounds, up 30
percent from the same period in 2011. Stock levels also were sharply higher for
legs, increasing to 22 million pounds, up 122 percent from a year earlier. Stocks of
“Other” turkey parts increased to 38.5 million pounds at the end of January, 45
percent higher than the previous year. One exception to these increases was in the
stocks of breast meat which were down 8 percent to 51million pounds. There were
also some small upward revisions to ending turkey stocks for 2011, now estimated
at 211 million pounds, up 5 million pounds from the original estimate and 10
percent higher than the previous year.
Even with an increase in the stocks of whole birds at the end of 2011 and into 2012
and less than ideal economic conditions, prices for whole birds have remained
strong. Whole-bird prices were well above the previous year throughout 2011 and
this pattern has continued into 2012. Over the first 2 months of 2012, whole turkey
prices continued above year-earlier levels. Prices for frozen whole hens in February
averaged $1.00 per pound, 11 percent higher than at the same time in 2011, which
in turn was almost 20 percent higher than in January 2010. Prices for frozen whole
hens are forecast to remain above year-earlier levels through the first three quarters
of 2012. Prices for most turkey parts were at or slightly higher than the previous
year in January. Two turkey cuts that had strong increases were thighs and
mechanically separated meat. Thigh meat prices in January were $1.47 per pound,
up 12 percent from the previous year. Mechanically separated meat was $0.33 per
pound in January, 14 cents higher (72 percent) than a year earlier. Prices for
mechanically separated meat were also sharply higher than the previous year
throughout the second half of 2011, boosted by strong gains in exports, which were
21 percent higher in 2011.
Turkey Exports Continue Higher
In January 2012, turkey product exports totaled 54.7 million pounds, up 15 percent
from the previous year. Higher shipments to Mexico were a main factor in the
increase, totaling 34 million pounds, 17 percent higher than the previous January.
The strength in exports is surprising considering the higher prices for whole birds
and most turkey parts in the domestic market. Exports were also stronger to both
Hong Kong and Canada.
In 2011, total turkey exports were 703 million pounds, up almost 21 percent from
2010, driven by sharp increases to Mexico. In 2011, U.S. turkey exports to Mexico
totaled 399 million pounds, up 24 percent from the previous year and equaling 57
percent of all U.S. turkey exports. China and Hong Kong were the second- and
third-largest markets for U.S. turkey exports totaling 83 and 38 million pounds,
respectively. Shipments to China were 11 percent higher than the previous year,
while shipments to Hong Kong rose by 53 percent. Shipments to both these
markets were likely influenced by high duties imposed by China on imports of U.S.
broiler products.
Table Egg Production Up in January
Table egg production in January was 565 million dozen, up 0.7 percent from the
previous year. Table egg production has been higher in the last 5 months, although
in the last 2 months the number of hens in the table egg flock has been even with or
slightly lower than the previous year. The table egg flock numbered 284.2 million
birds in January, marginally higher than the previous year, but slightly lower than
the previous month. The table egg flock is expected to continue about even with or
slightly higher than the previous year for most of 2012, which is expected to result
in a small increase in table egg production in 2012. Table egg production is
forecast at 1.635 billion dozen in first-quarter 2012, 0.7 percent higher than the
previous year. Overall production for 2012 was revised downward to 6.62 billion
dozen, which would be a small increase (0.4) percent from 2011. The NASS
Annual Chicken and Egg Report contained revisions to table egg production in 2010
(to 6.547 billion dozen) and 2011 (to 6.590 billion dozen).
While table egg production was rising slightly in January, hatching egg production
continued to be sharply lower, with production falling to 87 million dozen, down
4.8 percent from a year earlier. The declines in hatching egg production over the
last 7 months was the result of lower production of meat-type hatching eggs as
production of egg-type hatching eggs has been higher, especially in the last 3
months. Hatching egg production during the first three quarters of 2012 is expected
to be down from a year earlier, but it is expected to expand slightly as broiler
production increases in the fourth quarter. As with table eggs, the NASS Annual
Chicken and Egg Report contains some revisions to hatching egg production in both
2010 and 2011. In both cases, the revisions were 10 million dozen higher than the
previous estimates.
Wholesale table egg prices were relatively strong in January 2012, at $1.08 per
dozen, Grade A large. This is about even with the previous year, but a decrease of
almost $0.36 per dozen from the previous month. Table egg prices remained at
about $1.02 per dozen throughout most of February and into the beginning of
March. With Easter relatively early this year (April 8), egg prices are expected to
move upward through the end of March and then decline seasonally. The estimate
for first-quarter 2012 egg prices was lowered to $1.09 to $1.11 per dozen, well
below the average for the previous quarter, but up about 4 percent from the previous
year. With a small expansion expected in table egg production, egg prices for 2012
are expected to average $1.10 to $1.15 per dozen, which would be about 11 percent
lower than the previous year.
Egg Exports Expand in 2011
Egg exports in 2011 rose to 275.4 million dozen, up 6.6 percent from a year earlier. Much of the growth was due to higher shipments to a number of Asian markets. Exports to Canada declined by 11 percent, and Japan became the largest overall market for U.S. eggs and egg products. Although shipments to Canada fell, strong gains to Japan and Mexico more than offset the decline. Exports to Mexico totaled 19.1 million dozen, 29 percent higher than the previous year. In Asia, the biggest gains were from larger shipments to South Korea, Japan, and Hong Kong. Together, these three countries accounted for 104 million dozen of U.S. egg and egg-product exports, 47 percent higher than the amount they imported in 2010. The value of egg exports increased even faster, with shipments totaling $408 million, an increase of 14 percent from the previous year.
Sheep/Lamb
Lamb and Mutton Production Expected To Show Strength Leading Up to the Religious Holidays
In the first quarter of 2012, commercial production of lamb and mutton are forecast
at 38 million pounds, 5 percent higher than the same period in 2011. Although
Easter and Passover will be in early April, most of the lamb production in
anticipation of these holidays will take place in March. Typically, lamb demand
exhibits some seasonality and is highest ahead of these religious holidays. As a
result, despite declining annual lamb and mutton production and relatively low
production in January and February, increases are expected in the weeks leading up
to the holiday season in expectation of the higher demand. Commercial lamb and
mutton production in March has been consistently higher than in any other month of
the year.
Choice Slaughter lamb prices at San Angelo have declined slightly despite tight
supplies. Since 2011, one of the best years on record, Choice slaughter lamb prices
have continued to remain relatively firm, with first-quarter 2012 prices expected to
be $145-&146 per cwt, slightly below fourth-quarter 2011.
A number of factors may be contributing to the strong prices. The first factor relates
to global supply and demand issues. Australia and New Zealand have been major
suppliers of lamb and mutton, but both countries have seen declines in the number
of animals that they slaughter each year. A similar decrease has occurred in the
United States in the past year. Declining sheep inventory has resulted in tight
supplies and reduced slaughter numbers. In addition, high lamb and mutton prices
have resulted in increased retention.
A second factor in the strong prices for lamb is exchange rate conditions, which
have also made the U.S. lamb and mutton market very competitive. The weak U.S.
currency relative to that of countries such as Australia has made U.S. exports very
attractive. In 2011, lamb and mutton exports were up 19 percent from the previous
year. Exports in January 2012 totaled 1.5 million pounds, slightly above the same
period in 2011.
However, looking ahead, prices could be negatively impacted by the increased
number of over-finished lambs that are currently in the system. Slaughter weights
have jumped in recent months, with dressed weights for January and February 2012
averaging above 75 pounds. Overfinished animals tend not to grade well, and as a
result they could lower average cutout values and ultimately affect prices. The
overfinished problem appears to be exacerbated by the fact that expensive hay
prices appear to be pushing lambs off pastures and into feedlots earlier than normal
and increasing their average length of stay.
Imports in 2011 came in at 163 million pounds, 2 percent below the previous year.
January 2012 imports were 11 million pounds, down 34 percent from the same
period last year. Imports from New Zealand dropped considerably, down 54
percent from the same period last year, while imports from Australia were down 21
percent. The same relative currency strengths that have made U.S. exports
attractive to foreign markets where the U.S. dollar is weaker than foreign currencies
could be limiting the attractiveness of imports from Australia and New Zealand for
U.S. markets. First-quarter 2012 imports are forecast at 47 million pounds, 6
percent below the same period in 2011.
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