The USDA’s Economic Research Service reduced its 2017 US commercial beef production forecast by almost 150 million pounds from October to 26.4 billion pounds on fewer fourth-quarter steer and heifer marketings and lighter carcass weights.
Thursday’s Livestock, Dairy, and Poultry Outlook said data on federally inspected slaughter indicate that significantly more cows were being slaughtered as a percent of the total in the latest week, suggesting dressed weights will remain relatively low.
For the week ended Oct. 28, the AMS said steer and heifer carcass weights have climbed to their highest levels since early January. However, these weights remain 16 and 11 pounds, respectively, below the same period last year.
Beef production in 2018 was projected higher by about 325 million pounds from October to 27.6 billion pounds. The 4.6% increase from 2017 was based on continued large feedlot placements in second-half 2017 and first-half 2018, leading to projections for higher marketings in 2018.
Comparing 2017 to 2015, there were 5.7% more cattle on feed and 2.9% more cattle waiting to be placed on Oct. 1. An increase in overwinter forage availability and a larger calf crop likely support the strong placements in 2018.
The increase in the proportion of heifers on feed on Oct. 1 may be reflecting only modest retention of heifers for breeding, supporting more heifers being placed on feed in coming months.
Based on strong retail and packer margins, demand was expected to encourage feedlots to market cattle on a timely pace in 2018.
STRONG DEMAND TO PUSH EARLY 2018 CATTLE PRICES
For most of 2017, market demand has pulled cattle through US feedlots at a rapid pace, likely keeping dressed weights lower than last year and limiting the number of cattle in feedlots over 150 days.
At present, packers may be forced to bid up cattle prices because feedlots do not have an incentive to sell below their breakeven prices, in light of low feed costs and high futures prices for December and February. With strong demand for beef and continued firm packer margins, fed cattle prices for the fourth quarter were expected to average above last year.
However, sometime in the first half of 2018, fed prices were expected to be below those of 2017, reflecting increasing supplies of slaughter-ready cattle.
The fourth-quarter forecast for fed steer prices was raised from last month to $117.00 to $121.00 per cwt, and the forecast for the first quarter of 2018 was raised to $116.00 to $124.00 per cwt.
The price forecast for 750- to 800-pound medium frame No. 1 feeder steers was raised to $155.00 to $159.00 per cwt for the fourth quarter of 2017. The forecast for 2018 feeder steers also was raised to $144.00 to $152.00 per cwt in the first quarter and $143.00 to 153.00 per cwt in the second quarter.
CATTLE, BEEF RECAP
About 617 head of fed cattle sold on the Livestock Exchange video auction Wednesday at $119.21 and $119.25 per cwt, down about $4.75 from a week earlier.
Cash trade was reported in the Plains at mostly $119 on a live basis, down about $5 from last week. Dressed-basis trade was reported at $188 to $190 per cwt, down $1 to $4.
The USDA’s choice cutout Thursday was up $0.11 per cwt at $210.24, while select was off $2.78 at $187.83. The choice/select spread widened to $22.41 from $19.52 with 95 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Wednesday was $158.44 per cwt, down $0.86. This compares with Thursday’s Nov settlement of $157.77, down $0.22.