Cattle and hog prices this year will be lower than previously forecast because demand for beef and pork has “slackened,” the U.S. Department of Agriculture said.

Slaughter-ready steers are expected to average $92 to $96 per hundred pounds during 2010, down from a May estimate of $94 to $98, the USDA said in its monthly supply and demand report today. The revised estimate is still up from an average of $83.25 in 2009.

Hogs are expected to average $54 to $57 per hundredweight, compared with a May estimate of $55 to $57, the USDA said. In 2009, slaughter-ready hogs averaged $41.24.

The USDA’s downward revisions follow a slide in cash and futures prices since early May, when Europe’s financial turmoil and concern over the U.S. economy’s sluggish recovery sent stock markets tumbling.

High unemployment suggests many consumers will shun pricier beef and pork cuts, a prospect underscored by today’s report. The USDA also lowered its projections for beef and pork consumption.

“The economy has slipped a little bit,” said Rich Pottorff, chief economist for Doane Advisory Services.

Pottorff noted that wholesale beef prices have “dropped off a cliff” recently. “There’s a lot of concern on the part of meat processors on which direction wholesale prices will go,” he said. “Nobody’s sure how strong the economy’s recovery is going to be.”

Also in today’s report, the USDA slightly raised estimated U.S. milk production for 2010 and slashed projected corn stockpiles next year by 13 percent because of stronger than expected ethanol demand. Corn futures rallied.

Cattle prices rallied near two-year highs this spring, and hogs also surged, as shrinking animal inventories forced meatpackers to bid more aggressively. But the recent stock market slump combined with the demand concerns to deflate bullish enthusiasm.

Cash cattle in the U.S. Plains sold for about $93 per hundredweight earlier today, after topping $101 earlier this spring, according to USDA data.

“These summer months may not be as strong in the cash market” for cattle, said Larry Glenn, an analyst with Frontier Ag, Inc., in Quinter, Kan. “Demand has not been as strong.”

The USDA reduced U.S. beef consumption in 2010 to an estimated 58.9 pounds per person from a previous estimate of 59.3 pounds. The revised figure is down 3.8 percent from 2009 and would be the lowest per-capita consumption since 1952, according to USDA data.

Estimated pork consumption was lowered to 46.8 pound per person, down from 47 pounds previously and the lowest since 1978.

The USDA also cut its 2010 U.S. beef production by 0.8 percent from last month’s estimate, to 25.6 billion pounds, citing lower cattle slaughter and lighter carcass weights. Pork production was lowered 0.9 percent, to 22.1 billion pounds, also reflecting lower slaughter, the USDA said.

While the livestock price rally has cooled, beef and pork producers probably can still expect to sell animals at profits this year, analysts said.

Pottorff, the Doane economist, said the break-even price for pork producers is about $45 per hundredweight, based on current corn prices. The break-even price is still at least $9 below the USDA’s full-year hog price projection.

“The collapse in hog prices is surprising to me, because we really haven’t seen that much change to the fundamentals,” Pottorff said.

Producers, Pottorff said, shouldn’t panic. “The supply-demand scenario still looks like prices and profitability should be good the rest of the year,” he said.

In late trading today, June lean hog futures in Chicago fell 0.125 cent to 77.325 cents a pound, after yesterday reaching 77.15, the lowest price since mid-February.

June hogs are down almost 12 percent from a contract high of 87.8 cents on April 22. The hog futures reflect carcass prices.

June live cattle rose 0.65 cent to 90.3 cents a pound, down 7.1 percent from a contract high of 97.2 cents reached May 2.

Source: Bruce Blythe, Business Editor, Vance Publishing