Total livestock and poultry production increased about 1 percent in 2012 as declines in beef and broiler production were more than offset by increased pork and turkey production.
However, during the year drought in much of the country caused changes in production decisions.
The cattle sector, which had been poised for increased heifer retention at the beginning of 2012, was hit with loss of pasture and pond water reserves through much of cattle-raising country and a spike in feed prices as the corn crop deteriorated mid-year.
For producers in much of the Southern Plains, this was the second year of poor forage production and water shortages, further exacerbating resource tightness.
In the face of tight forage and water supplies, cow herd liquidation continued at relatively high rates in much of the country.
Nationally, federally inspected beef cow slaughter was just over 3.3 million head, down slightly from 2011 but it remained relatively high as a proportion of beginning year inventories.
Steer and heifer slaughter was also lower as supplies of cattle outside feedlots dwindled, but the decline was mitigated by cattle being sent to feedlots earlier than normal, at lighter weights, as forage conditions worsened.
Despite higher feed prices, cattle weights increased in 2012 as a combination of mild-winter weather and increasing use of beta-agonists improved feed efficiency.
The hog sector faced sharply higher costs for feed mid-year which likely changed production decisions. Early in the year, returns to hog producers were generally positive and producers increased farrowings.
As feed prices jumped, returns became negative and coupled with the uncertainty about feed prices into 2013, producers reduced farrowings in the second half of 2012.
Offset farrowing decline
However, the increase in first-half farrowings more than offset the decline in second-half farrowings, and with continued increases in pigs per litter, hog supplies increased in 2012. In response to higher feed costs, producers reduced market weights in late 2012, but the confluence of higher slaughter numbers and slightly heavier weights earlier in the year resulted in a slight increase in 2012 pork production.
Broiler production in 2012 was below 2011, reflecting industry retrenchment in the later part of 2011 and through much of 2012 in response to poor returns. However, the sector began to expand production in the later part of 2012, relative to the severely reduced fourth-quarter 2011 production, likely in response to stronger broiler prices during the year.
The outlook for 2013
Feed prices are likely to remain high through the summer of 2013, but later in the year feed prices are expected to decline sharply as the 2013/14 corn and soybean crops are harvested. In the first 3 quarters, producers will be facing corn prices that will reflect a forecast crop year average of $6.75-$7.65 per bushel, compared with $6.22 in 2011/2012.
However, with expectations of a relatively large planted area and trend yield growth, prices in the last quarter are expected to average below the $4.80-per-bushel price forecast for the 2013/14 crop year. Soybean meal prices for 2012/13 are forecast to average $430-$460 per ton, up from $394 the previous year, but like corn, prices will decline with the harvest of next year’s soybean crop.
Soybean meal prices are forecast to average $300 per ton in 2013/14 with prices averaging lower in the early part of the marketing year.
Real U.S. GDP is expected to grow somewhat over 2 percent, higher than last year’s growth and with gradually declining unemployment. Internationally, economic growth is forecast to be slightly more rapid than for the U.S.
The U.S. dollar will likely remain relatively weak against most countries in the coming year, helping U.S. exports, but the dollar’s current strength against the Yen may limit red meat export opportunities.
Production of pork and poultry meat are forecast to increase as producer returns in those sectors will likely improve with declining feed prices in the later part of the year, slightly higher hog prices, and record broiler prices.
However, increases in non-ruminant meat production will be insufficient to offset lower beef production which will face tighter supplies of cattle available for slaughter as the year progresses.
Despite increased meat imports and slightly lower red meat and poultry exports, total domestic meat supplies in 2013 will be lower and total domestic per capita disappearance of red meat and poultry for 2013 is expected to average 201.9 pounds, the lowest level of disappearance on a per capita basis since 1991.
Cattle and whole-bird broiler prices are forecast to reach record levels; cattle prices will reflect tight supplies of beef and broiler prices will be supported by strong demand.
Hog price increase
Hog prices will also increase, although remaining below 2011’s record level. However, turkey prices will decline as production increases.
Cattle and beef
The U.S. cattle herd declined for its sixth consecutive year in 2012. USDA’s January Cattle report estimated that the number of cattle and calves on Jan. 1, 2013 fell about 2 percent, to 89.3 million head. The cow herd was estimated at 38.5 million head, over 2 percent smaller than a year earlier. The 2012 calf crop was estimated at 34.3 million head, the smallest calf crop since 1949.
The U.S. cattle inventory is expected to continue contracting during 2013. The rate of decline will depend to a large extent on the availability of forage. Producers in much of the country are facing tight supplies of forage and in many areas, supplies of pond water are critical.
Assuming normal pasture development during the year, returns to cow-calf operators would support retention of beef cows and the placement of heifers in the breeding herd. On Jan. 1, producers indicated they were retaining 2 percent more heifers for beef cow replacement. However, dairy cows, while about equal to 2012 at the beginning of the year, are expected to decline; the number of heifers held for dairy cow replacement was down 2 percent.
With a smaller total cow herd at the beginning of the year and a slight decline in the total number of heifers expected to calve during 2013, a further decline in the calf crop can be expected.
This will lead to tighter cattle supplies moving into 2014 and to the extent producers retain heifers for breeding from the 2013 calf crop, it is unlikely that calf supplies could support an increase in beef production before 2016.
The number of cattle on feed on Jan. 1, 2013 was estimated at 13.4 million head, a 5.5 percent decline from 2012. Net placements in feedlots with 1,000 head or greater capacity declined by 6.5 percent during 2012 as the number of cattle available for placement shrank.
There was also a slight decline in the number of cattle in feedlots with less than 1,000 head. However, the sharp decline in prices of light-weight feeder calves relative to heavier weight calves may have encouraged backgrounding operations which had access to forage or supplies of alternative roughages to retain cattle to add weight on the farm.
Thus, the number of cattle outside feedlots at the beginning of the year was slightly above 2012. If producers retain more heifers than indicated, the supplies of heifers available for placement during 2013 may decline more sharply.
The availability of forage will affect the timing of placements, but placements are expected to drop more rapidly in the second half of the year. Imports of cattle in 2013 are forecast to be 1.95 million head, about 14 percent below last year as smaller calf crops in both Canada and Mexico in 2012 imply tighter supplies of feeder cattle for export in 2013.
Commercial beef production for 2013 is forecast to decline about 3 percent, to about 25.1 billion pounds. Steer and heifer slaughter in first-half 2013 is expected to be virtually the same as 2012 but then decline sharply as feedlot inventories decline.
Cow slaughter expected to decline
Cow slaughter is also expected to decline from 2012 as producers retain cows and the breeding herd liquidation moderates. However, poor returns in the dairy sector will result in dairy cow slaughter remaining relatively high and partly offsetting the decline in beef cow slaughter.
Total commercial cattle slaughter during 2013 is expected to decline almost 4 percent. The decline in slaughter will be partly offset by increased carcass weights.
Carcass weights are forecast to increase to almost 791 pounds due to a combination of mild winter weather so far this year and increased adoption of beta-agonists which improve feed efficiency.
Beef exports for 2013 are forecast at 2.45 billion pounds down from 2.46 billion pounds in 2012. In 2012, exports declined almost 12 percent from 2011’s record as U.S. prices rose and due to the relative strength in the dollar, a greater proportion of the increase in prices was passed on to foreign buyers. Sales declined to most major markets with the exception of China and Hong Kong.
Although economic growth in most markets for U.S. beef should support demand in 2013, economic growth and tight supplies of beef in the U.S. will limit exports.
In addition, the dollar is expected to decline only modestly, implying that any forecast increases in U.S. beef prices will be more fully transmitted to foreign buyers. Russia has banned imports of beef which is not certified as Ractopamine-free, but with tight U.S. beef supplies available for export, it is expected that product will shift to other markets.
U.S. beef imports are forecast at 2.57 billion pounds for 2013, up about 16 percent from 2012. This follows an 8 percent increase in imports in 2012. Improved economic growth and reduced U.S. cow slaughter will support increased imports.
However, continued strong global demand and the relative weakness in the value of the U.S. dollar may constrain growth in imports.
The 5-Area steer price for 2012 is forecast to average $125 to $134 per cwt, up from 2012’s record average of $122.86. As fed cattle supplies shrink in 2013, prices are expected to continue to climb, but both packers and feedlot operators are facing poor-to-negative margins which will limit flexibility in price negotiations.
Feedlot returns are negative and operators will continue to face increasing feeder cattle prices as feeder calf supplies shrink and relatively high feed costs until the next crop is harvested.
Packers, on the other hand, may be limited in what they can pay given the downstream effects of potential resistance to high beef prices and competition from other meats. Although tighter supplies will likely pressure retail prices, increases may be limited compared to the past several years. Retail choice beef prices for 2013 are expected to average slightly above last year’s record $5.02 per pound.
Hogs and pork
Despite relatively high feed prices and recent negative returns, producers are expected to expand production in 2013. Producer returns were negative for most of the later part of 2012 and returns in 2013 will reflect the relatively high feed costs for much of 2013.
Over the past year, producers have kept the number of sows farrowing little changed, while increasing pig crops though gains in pigs per litter.
The December 2012 Quarterly Hogs and Pigs report estimated that on December 1, 2012 the inventory of all hogs and pigs was 66.3 million head, virtually unchanged from a year earlier.
Bigger breeding herd
The breeding herd was fractionally higher at just over 5.8 million head. Producers reduced farrowings in second-half 2012, likely as a result of poor returns and concerns about further increases in feed prices. However, in the second half of 2012, the decline in farrowing numbers was largely offset by gains in pigs per litter and the pig crop was virtually unchanged from 2011.
The impact of poor second half returns and concerns about feed prices through the balance of the crop year has extended into the first part of 2013 as producers intend to farrow fewer sows in the first half of the year.
However, as concerns about feed prices diminish with approach of the next crop harvest, producers are expected to increase second-half farrowings. Pigs per litter in 2013 are expected to grow at an average rate of just over 1 percent from 2012 which implies that the pig crop in first-half 2013 will be fractionally higher than last year despite reduced farrowings.
With expected increases in second-half 2013 farrowings and continued gains in pigs per litter, the 2013 pig crop is forecast at 118.6 million head, 1 percent above 2102.
U.S. hog imports are forecast at 5.5 million head for 2013, down slightly from 2012. The January 1, 2013 Canadian hog inventory will be released on March 6.
Although recent data points towards a gradual increase in the Canadian inventory over the past several years, a relatively weak U.S. dollar is expected to limit incentives for Canadian producers to ship more hogs and pigs to the U.S.
Commercial pork production for 2013 is forecast at 23.4 billion pounds, 0.7 percent higher than 2012. . Hog slaughter is expected be about 1 percent higher than last year as the slightly smaller second-half 2012 pig crop will be slaughtered during first-half 2013 and the larger expected first-half 2013 pig crop will be slaughtered in second-half 2013.
Carcass weights are expected to average just over 205 pounds. This is fractionally below last year as high feed prices during the first 3 quarters of the year are expected to encourage produces to market hogs as rapidly as possible.
For 2013, pork exports are forecast at about 5.46 billion pounds, up slightly from 2012’s record 5.38 billion pounds. Although 2012 exports were down to several key markets, notably, Japan, Korea, China, and Hong Kong, exports were higher to Russia, Canada and Mexico and a number of smaller markets.
Sales in 2013 are forecast to remain relatively strong as U.S. pork prices reflect higher production and increasing prices for beef may increase the attractiveness of pork for importing countries. However, Russia’s recent ban on U.S. pork which is not certified as Ractopamine-free may be a constraint on export growth during 2013.
Pork imports for 2013 are forecast at 800 million pounds, virtually unchanged from 2012. Imports have been between 802 and 803 million pounds for the past 2 years. Imports from Canada and Demark, the predominant sources of imports, were lower in 2012, but were partly offset by increases in imports from Mexico, Chile, and other European Union sources.
Imports for 2013 are expected to reflect increased U.S. production, weaker domestic prices, and the continued relative weakness of the U.S. dollar.
U.S. hog prices, on a national base, 51%-52% lean, live equivalent, are forecast to average $61 to $65 per cwt for 2013, up from last year’s $60.88 per despite higher production.
Higher forecast beef and broiler prices and increased exports may provide support for the hog sector if consumers view pork as price competitive.
Retail pork prices for 2012 are expected to average slightly below last year’s $3.47 per pound.