June 5, 2003

 

Market Advisor: Lower Meat Production Supports Livestock Prices

By Tim Petry, Livestock Economist
NDSU Extension Service

Total U.S. meat production in 2003 is expected to decline about 2 percent from last year, with all species showing less production. This is quite a contrast from 2002 when beef, pork, and broilers were registering record high production levels, and relatively low prices.

The decline in red meat production is because of lower inventories of cattle, hogs, and sheep. Severe drought conditions in much of the Western United States caused a continued decline in cattle and sheep inventories. Some areas have experienced drought for up to four years. Hog inventory numbers are declining from the cyclically high numbers posted in 2002.

Beef production in 2003 is expected to decline 3 percent from last year. In 2002, beef production increased almost 4 percent. Tight supplies of market-ready fed cattle, and more importantly, sharply lower slaughter weights are causing reduced beef production. For the last week in May, steer slaughter weights averaged 1,209 pounds compared to 1,232 pounds during the same week in 2002. Heifer weights have declined even more than steer weights. Fed steer prices in mid-May were near $80 per hundredweight, more than $15 higher than last year.

Beef production would even be lower, but cow slaughter remained at high levels. First-quarter beef and dairy cow slaughter rose 5 and 14 percent, respectively, both the largest since 1997.

Dairy cow slaughter is high because of low milk prices and smaller producers leaving the industry. Higher beef cow slaughter was caused by the continued dry weather conditions in many cattle-producing areas. In early spring, about 40 percent of the U.S. beef cow inventory was in areas experiencing drought.

If weather conditions improve, cow slaughter will likely decline in the second half of 2003. More normal weather conditions could result in 2004 beef cow slaughter levels well below the past several years.

The USDA monthly Hogs and Pigs Report released on May 30 indicated a breeding hog inventory at 3 percent below the cyclically high number of 2002. Continued breeding herd liquidation and lower farrowing intentions will cause lower production in 2003. High dress weights will partially offset lower numbers, so production is likely to decline by only 1 percent for the year. The USDA Economic Research Service is projecting hog prices to average $38-40 per hundredweight in 2003, compared to $35 last year.

Lamb and mutton production in 2003 will continue the long term declining trend; despite incentives to stabilize production with the USDA Lamb Industry Improvement Program, and the reinstating of the wool program in the 2002 farm bill. Production will likely fall by seven percent this year. Drought conditions in major sheep producing areas have caused reduced inventories of sheep.

Declining production is having a positive impact on lamb prices. Choice lambs were selling for near $100 per hundredweight at the end of May, over $30 higher than last year. May is usually the seasonal high for lamb prices, but USDA is projecting lamb prices to average $12-15 per hundredweight higher than last year.

Both broiler and turkey production are expected to fall in 2003, but by less than 1 percent. USDA expects broiler prices to average 60-63 cents per pound in 2003, compared to 56 cents in 2002. Turkey prices are predicted to average near last year’s average of 64.5 cents per pound.

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Source: Tim Petry, (701) 231-7469, tpetry@ndsuext.nodak.edu
Editor: Tom Jirik, (701) 231-9629, tjirik@ndsuext.nodak.edu