2011 Livestock Prospects Are High

2011 Livestock Prospects Are High

Record or near-record prices, tight margins.

Total U.S. production of meat and poultry is forecast to remain flat in calendar year 2011. Slight growth in supplies of pork and poultry are likely. But beef supplies will dwindle.

"Stable production, higher exports and some recovery in domestic demand should help maintain livestock prices near last year's historic highs," Joe Glauber, USDA's chief economist told more than 2,000 participants attending USDA's annual Outlook Forum Thursday morning.

For livestock and poultry producers, rising feed costs will be an important component of producer production decisions in the upcoming year. Higher feed costs could lead to below average margins for livestock and dairy producers in 2011.

Cattle prices forecast record high

Commercial cow slaughter maintained a high pace during all of 2010. Cow slaughter was the largest in well over a decade, even though the U.S. cow herd on Jan. 1, 2010 was the smallest since 1949.

While cattle marketings for the last half of 2011 are expected to be lower, large year-over-year, net placements in feedlots during late 2010 and January 2011 will likely maintain beef supplies during the first half of 2011 near previous year levels. For all of 2011, beef production is currently forecast to decrease 1.5%, following a 1.4% rise in 2010.

Steer prices are expected to average a record $102 to $109 per cwt. this year, compared with $95 per cwt. in 2010.

Total North American cattle inventories are at their lowest levels in decades. With smaller Canadian and Mexican inventories expected in 2011, U.S. cattle imports are forecast at 2.1 million head for the year, down from 2.3 million in 2010.

Pork production to rise slightly

Pork production in 2011 is estimated to climb by 0.4% after falling by 2.4% in 2010. While hog prices were up 34% in 2010 and are expected to average higher in 2011, surging feed costs are expected to temper expansion over the next several months.

First half 2011 sow farrowings could be about 1.4% lower than first half 2010. While smaller breeding animal inventories and lower farrowing intentions often translate into lower pig crops, continued gains in sow productivity are expected to largely offset lower farrowing numbers in 2011.

Hog weights are expected to average above last year. But higher feed costs may limit year-over-year gains in slaughter weights later in the year. Nevertheless, average dressed weights will be slightly ahead of last year's average, helping to push pork production ahead of last year's level.

Hog prices are forecast to average $58 to $61 per cwt. in 2011, up from $55 in 2010 and $41 in 2009.

Broiler production to climb modestly in 2011.

Broiler production prospects changed dramatically in early 2011, due to sharp changes in both the weekly number of broiler eggs placed in incubators and the number of chicks being placed for growout.

At the end of November, the number of chicks being placed for growout was averaging 5.5% higher than the previous year. By the first week of January, the average number of chicks placed for growout was only 0.8% higher than in the same period the previous year. "This abrupt slowdown is likely the result of sharp increases in feed prices, especially coming at a time when wholesale prices for many broiler products have been declining," says Glauber. Reflecting this slowdown, broiler production is projected to rise by about 1% in 2011 following a 4% hike in 2010.

The price of broilers is forecast to range from 80 to 85 cents per pound in 2011, compared with 83 cents in 2010 and 78 cents in 2009.

Milk prices to move higher

Milk production is estimated to increase by 1.8% in 2011 to 196.1 billion pounds. While feed costs are up considerably in recent months, a decline in cow numbers may not occur until later this year because of the large number of replacement heifers available.

Milk per cow is forecast to climb again this year, but at a slower pace than in 2010. The gain in output per cow last year was due to good weather in addition to moderate feed prices.

In recent weeks, both the domestic and international markets for dairy products have tightened considerably, leading to sharply higher wholesale dairy product prices and futures prices for milk.

Milk output has been affected by cold weather in the U.S. and Europe and heavy rains in Australia. Since early January, the wholesale prices of cheddar cheese, butter and nonfat dry milk have increased by 25% to 50%. The all-milk price is forecast to average $17.70-$18.40 per cwt. this year, compared with $16.29 in 2010 and $12.93 in 2009. While milk prices are forecast to be higher in 2011, rising feed costs could continue to put financial pressure on dairy producers, especially those producers that purchase feed at current price levels.

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