The U.S. Department of Agriculture’s long-term agricultural projections, released this week, indicate that U.S. beef and pork production will enter an expansion phase over the next few years, largely because of demand in export markets.
The report also projects domestic food prices exceeding the overall inflation rate over the next two years, with lower demand for red meats, and continued high prices for feedgrains.
The report, which projects production, demand and price trends out to 2020, bases its assumptions on continuation of current government policies, trade agreements, weather and economic trends. Unpredictable disruptions in supplies or demand obviously could alter the outlook considerably.
Growth ahead for meat production
The report projects that U.S. red meat and poultry production will decline in 2012, as will domestic per-capita meat consumption. But with exports remaining strong and prices high, producers will begin to expand. Beef and pork production will turn upward in 2013 and continue to grow through the rest of the decade.
The report indicates U.S. beef cow numbers will rise from about 31 million head at the beginning of 2011 to over 34 million by 2020. The total cattle inventory will drop below 92 million head before expanding to about 96.7 million at the end of the projection period, according to the report. Although feed prices should decline from current levels, grain prices will remain high and encourage beef producers to keep cattle in pasture-based stocker programs for longer periods and to heavier weights.
Pork production also will decline in 2012 in response to lower returns this year, but by 2013, producers are expected to increase farrowings as higher hog prices and lower feed prices improve returns. The report also indicates continued gains in breeding-herd productivity and increased slaughter weights will contribute to higher pork production, but at slower rates of gain than in the past several years.
Poultry production is projected to rise the most among the meats over the next decade, but that growth will be slower than during the 1980s and 1990s.
Exports drive expansion
Global economic growth and relative weakness of the U.S. dollar will bring continued expansion of beef, pork and poultry exports through the decade. The report projects beef exports down slightly this year, at 2.27 billion pounds, but increasing to 2.4 billion pounds in 2012 and continued increases through the decade. By 2020, beef exports are projected at 3.1 billion pounds.
Pork exports grow every year in the USDA projections, with this year’s total of 4.67 billion pounds followed by 4.79 billion in 2012. By 2020, the report projects pork exports at 5.58 billion pounds.
Beef and pork production follow similar trends, with beef showing slight declines in 2011 and 2012, but growth through the rest of the decade. By 2020, the report projects total U.S. Beef production at 28.2 billion pounds.
Pork production shows a slight decline in 2012, rebounds slightly in 2013, then grows through the rest of the decade, with 2020 production projected at 24.8 billion pounds.
Livestock prices generally will trend upward through the decade as well, according to the report, which pegs the average fed-steer price for 2011 at $109.25 per hundredweight, and $120.91 for 2012. Prices fluctuate somewhat later in the decade but remain above $120 per hundredweight and by 2020 average $127.35.
The report projects hog prices to average $55.43 per hundredweight this year and $58.55 in 2012. Like beef, prices generally increase through the decade, reaching an average of $64.28 by 2020.
Grain supplies remain tight
Continuing high levels of corn-based ethanol production corn exports will keep corn demand and prices high, which will keep corn acreage in a range of 90 million to 92 million acres over the projection period compared to 88 million in 2010. The report projects that ethanol production will continue to grow, but at a slower rate through the rest of the decade, accounting for about 36 percent of total corn use. The growth rate assumes current tax credits and import tariffs remain in place.
Feed and residual use of corn has bottomed out early in the decade according to the report, due to reduced meat production and increased feeding of distillers grains. Feed use rises through the rest of the projections as meat production picks up.
Food and industrial use of corn is projected to rise over the next decade, as are corn exports. The report shows corn prices dropping from the current peak over the next few years, and generally stabilizing between $4 and $5 per bushel through the rest of the decade.
Higher livestock prices coupled with more stable feed prices translate to higher returns for beef and pork producers. The report projects cash returns for cow-calf producers down slightly this year at $54.97 per cow. Next year the average return rises to $112.80, and by 2020 the report projects returns averaging $144.48 per cow.
Likewise for pork producers, the report shows farrow-to-finish cash returns this year at a negative $11.63 per hundredweight. Next year the picture improves somewhat, with losses averaging $5.54 per hundredweight. By 2020, cash returns average a positive $2.36 per hundredweight.
Read the full report online.