CME: Lower Feed Prices Expected to Boost US Meat Production in 2017

US - Today, we review the livestock and poultry numbers in last Friday’s World Agricultural Supply and Demand (WASDE) report from the US Department of Agriculture, write Steve Meyer and Len Steiner.
calendar icon 17 August 2016
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WASDE analysts’ expectations for lower feedstuff costs filtered-through to their livestock and poultry forecasts, but the changes in production numbers were rather modest.

For the current year (2016), total red meat and poultry production was reduced very slightly from their July forecast (down 0.1 per cent). None of the 2016 production changes compared to a month ago (August WASDE compared to July’s) in the individual commodity break-out (beef, pork, broiler, and turkey) were of a magnitude to deserve lengthy commentary and were clearly not price impacting.

So, essentially USDA reaffirmed their 2016 increase in total red meat and poultry production compared to 2015’s of 2.98 billion pounds, or 3.1 per cent.

Looking ahead to 2017, in terms of total red meat and poultry production, WASDE latest forecast is up slightly from their prior estimate (increasing 0.1 per cent from July’s).

The WASDE report did state: “Production forecasts for 2017 red meat and poultry are raised as lower forecast feed prices are expected to encourage increased production.”

Year-over-year USDA forecasts US total red meat and poultry production in 2017 will increase by 2.8 per cent. According to USDA, 2017’s beef production is set to rise 3.4 per cent compared to 2016's, pork to increase 2.4 per cent, broiler to be up 2.6 per cent, and turkey to increase by be 2.5 per cent.

On the international trade front, for the US the WADSE report said: “The beef import forecasts for 2016 and 2017 are raised in part due to expectations of increased imports from Brazil beginning in the latter part of 2016”.

Importantly, note that even with their Brazil change, large year-over-year declines in US beef imports are forecast in both 2016 and 2017.

Also, they noted that they lowered US broiler exports for 2016 due to the slower pace of exports achieved in June. In the graphics associated with this article, the numbers match the WASDE forecasts for 2016 and 2017.

For pork, essentially no changes were made to WASDE annual import or export forecasts.

Annual average livestock and poultry price forecasts were generally slightly reduced for 2016. This year’s annual average slaughter steer price was reduced from the July forecast by about $1.00 per cwt. to a range of $124-$127 per cwt. The annual average slaughter barrow and gilt price for 2016 (live weight basis) also was reduced by about $1.00 per cwt. to a range of $47-$48 per cwt.

For 2017, WASDE put all livestock and poultry prices except for broilers below 2016’s. They currently have 2017 slaughter steers in the range of $118-$128 per cwt. and live slaughter barrows and gilts $42-$45 per cwt.

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