Slaughter of dairy cows and supplies of competing meats will pressure beef prices into next year, according to USDA’s June 17 Livestock, Dairy and Poultry Outlook report. Commercial dairy cow slaughter will increase due to the Cooperatives Working Together program and will offset the decline in beef cow slaughter. Rising costs, reflecting demand for feeder calves to stock rain-improved pastures and rising corn prices, will dampen enthusiasm for feedlot placements aimed at post-summer markets. The report also notes that beef markets continue to face stiff competition from abundant supplies of pork and poultry. Those supplies of competing meats will, however, decline somewhat over the coming months as producers face higher feed costs and lower selling prices.
Cow-calf producers appear reluctant to increase cow inventories by retaining replacement heifers. In addition, spring rains have reduced the total area affected by dry conditions, providing ample pasture-based forages for the lowest Jan. 1 beef cow inventory since 1963. Second-quarter 2009 total commercial cow slaughter could be down slightly from second-quarter 2008.
However, commercial dairy cow slaughter will increase as a result of liquidation of the sector in response to poor returns. In the second quarter of 2009, increased dairy cow slaughter could offset much, but likely not all, of the reduction in commercial beef cow slaughter due to the producer-funded Cooperatives Working Together program. Combined commercial beef and dairy cow slaughter for the last half of 2009 is expected to be greater than in second-half 2008 as a result of continued heavy dairy cow slaughter and a seasonal increase in beef cow slaughter.
Cattle feeders could break even, or even have marginally positive returns this summer, due to relatively low feeder calf and grain prices this past winter. The report notes, however, that profits could be fleeting. Improved pasture conditions will provide support for feeder cattle prices over the next month or so, especially for lighter-weight calves for placement on summer pastures. Limited rainfall in southern Texas has kept that area below last year’s year-to-date precipitation. Pasture demand will be offset by a lack of enthusiasm on the part of cattle feeders to bid for feeder cattle that are unlikely to yield a profit for the feeder by the time they reach finishing weight this fall and winter. Cattle feeders will be especially reluctant to place cattle if corn prices rise in response to delayed planting.
Weakening international demand continues to affect U.S. beef exports, which the report projects will decline 8 percent during 2009. Exports to Japan have held up better than to some other markets, as the Japanese yen maintains strength against the U.S. dollar. The report notes that the dollar has weakened somewhat in recent months, and that trend could help boost exports. The agency expects beef exports to increase about 9 percent during 2010.
Read the full report from USDA.