Higher Production Estimates Could Pressure Cattle, Hogs

The USDA Friday increased its forecast for total 2015 and 2016 meat production from its previous estimate a month ago, a move that may pressure cattle and hog prices this week.

In its monthly World Agricultural Supply and Demand Estimates report, the USDA’s beef production estimate for this year was raised to 23.794 billion pounds from its September estimate of 23.549 billion as expectations for fourth-quarter slaughter rates and weights increased.  However, this remains below 2014’s production of 24.252 billion.

Similarly, forecast 2016 beef production was raised slightly to 24.960 billion pounds from September’s estimated 24.930 billion as estimates of cattle slaughter and carcass weights in the first half of the year were raised.

The USDA left its estimate of 2015 and 2016 beef imports unchanged from the September WASDE report at 3.437 billion pounds and 3.045 billion, respectively.

Because of the expected increases in domestic beef production and unchanged import levels, the USDA’s estimate of average steer prices for 2015 was reduced to $149.19 per cwt from September’s $152 to $155.  The 2016 estimate was reduced to $136 to $147 from $147 to $159 a month ago.  The USDA also cited weaker demand and competition from relatively large supplies of competing meats.

Estimates of 2015 and 2016 beef exports were lowered as demand is expected to continue relatively weak.  The latest WASDE report placed expected 2015 beef exports at 2.282 billion pounds, down from September’s estimate of 2.307 billion and off the 2.573-billion-pound pace of 2014.  Beef exports next year were placed at 2.425 billion pounds, down from the September projection of 2.485 billion but still off from the 2014 level.  The USDA did not say, but currency exchange rates could play a large role in these estimates.

 

PORK PRODUCTION SEEN HIGHER

 

USDA estimates for 2015 and 2016 pork production were raised from the September WASDE report as estimates for the pace of hog slaughter for the rest of this year were raised.  The USDA now sees 2015 pork production at 24.581 billion pounds versus September’s estimate of 24.526 billion and 2014’s 22.843 billion.

The USDA’s Quarterly Hogs and Pigs report estimated less of a decline in sows farrowing in the June-August quarter than were indicated in prior intentions.  Furthermore, farrowing intentions into early 2016 support an increase in forecast pork production in 2016.

Pork export forecasts for 2015 and 2016 were left unchanged from the September report at 5.225 billion pounds and the 2014 estimate of 4.857 billion.  However, import estimates were left unchanged from September 1.0 billion pounds, but were pared from the 2014 total of 1.008 billion.

Despite increased pork production estimates and steady imports, barrow and gilt prices for 2015 and 2016 were expected to be higher as demand has firmed.  The latest projected farm price for slaughter hogs was placed at $50.82 a pound, compared with the September projection of $50 to $51.  Last year, producers received an average of $76.03 per cwt.

 

CASH FED CATTLE TRADE QUIET

 

Private sources reported active fed cattle sales in the Plains and western Midwest last week at $123 to $127 per cwt on a live basis, compared with the USDA’s 5-market average the previous week of $118.61

On a dressed basis, cattle traded last week at $195 to $202, compared with the USDA’s 5-market average the previous week of $187.51.

Wholesale beef prices Friday were mixed, with the USDA reporting its choice cutout value at $203.00 per cwt, down $0.61 on the day, and its select cutout at $197.89, down $0.43.  For the week, choice was down $2.77 and select was down $3.47.

The choice/select spread was reported at $5.11.

The CME Feeder Cattle Index for the seven days ended Thursday was $184.29 per cwt, up $0.86.  This compares with the Oct settlement Friday of $188.97, up $1.10.