With a favorable forage and pasture situation, producers continue to graze cattle and calves to heavy weights. Cattle on Feed, released July 24, 2015, reported that June 2015 placements of cattle weighing 800-plus pounds totaled 545,000 head – up 11 percent over June 2014.
For June 2015, almost all major feedlot states have increased the number of steers and steer calves on feed in 1,000-plus-head feedlots, including the very heavy backgrounded cattle, compared with placed heifers and heifer calves (also down year-over-year).
Producers are continuing to hold cattle on feed for more than 150 days; the average live weights of finished cattle have been reported by the Agricultural Marketing Service to be more than 1,330 pounds. Further, the July 1, 2015 Cattle on Feed reported a 7 percent decline of heifers and heifer calves on feed on 1,000-plus capacity feedlots, more evidence of herd rebuilding.
The total number of cattle on feed in 2015 is expected to surpass the 2014 annual total, but total 2015 placements and marketings are both projected to decline compared with last year. It is likely that producers will continue to hold back cattle, given favorable feed prices and pasture conditions. Consequently, an increase in the number of placements and marketings is expected in 2016.
Unlike the Southern Plains and the Midwest, some regions of far-Western states are experiencing “D4” conditions, and wider areas are experiencing “D2” and “D3 conditions, while wildfires have affected parts of California (according to the Aug. 4, 2015, U.S. Drought Monitor (droughtmonitor.unl.edu/home.aspx).
As a result, the drought-stricken areas are likely to push their cattle onto feedlots at lighter weights than their Southern Plains counterparts.
The July Cattle report released on July 24, 2015, revealed that the July 1 U.S. cattle and calves inventory totaled 98.4 million head, an increase of 2 percent compared with a year earlier. Heifers weighing 500-plus pounds for beef cow replacements showed a 7 percent increase compared with July 2014.
The report showed dairy herd increases as well – up 1 percent from the previous year. The Cattle report does not document state-by-state head counts, making it difficult to pinpoint the exact locations of herd expansion. The report estimates this is the first July 1 cattle inventory increase since 2006. Table 1 provides a breakdown of cattle inventory by class and calf crop.
The Five-Area steer prices have been ranging between the upper $140s per hundredweight (cwt) to the low $150s per cwt in July and early August. The USDA projects prices to average $148 to $152 per cwt for third quarter, 5 percent below the same period last year. Fourth-quarter steer prices are expected to be $148 to $158 per cwt, an 8 percent decline from 2014 price levels.
Commercial beef production forecast lowered for the third quarter
Holding animals on pasture and in feedlots longer is expected to impact the number of commercial cattle slaughtered for the remainder of the year. The USDA lowered the commercial beef production forecast for third-quarter 2015 approximately 35 million pounds on expectations of lower cattle slaughter during the quarter.
The commercial beef production forecast for the fourth quarter was unchanged, fractionally higher than fourth-quarter 2014. USDA’s current forecast for commercial beef production in 2015 is expected to be approximately 2 percent lower than the previous year.
While the number of cattle heading to slaughter remains below the previous year, heavier average dressed weights have continued to be much higher than in 2014, helping to partially offset the lower number of cattle being processed.
Average cattle dressed weights in the third quarter are projected to average above last year, but the increase in weights during the fourth quarter is expected to narrow. Commercial beef production in 2016 is projected to reach 24.8 billion pounds, which would be the first year-over-year increase since 2010.
As of the week ending Aug. 14, Agricultural Marketing Service (AMS) weekly choice and select cutout values were reported at $242.66 per cwt and $234.55 per cwt, respectively (www.ams.usda.gov/mnreports/lm_xb459.txt).
Weekly cutout values (both choice and select) have increased in recent weeks, mostly due to packers limiting the number of animals processed on a weekly basis, but the inability of wholesale beef prices to gain much upward traction has kept packer margins under pressure.
Retail beef prices continue to hold at record levels, and the Economic Research Service’s monthly average retail choice beef price in June was reported at $6.11 per pound (www.ers.usda.gov/data-products/meat-pricespreads.aspx).
Retail prices are expected to remain above year-ago levels through the remainder of the year but could decline below this year’s second- quarter estimate due to the seasonal waning in demand for grilling items after Labor Day, which is considered to be the last grilling holiday of the year, along with increased resistance to high beef prices from consumers, seasonally larger beef production and large supplies of pork and poultry through the remainder of 2015.
Beef imports continue to thrive, strong dollar hampers beef exports
U.S. beef imports totaled more than 1.8 billion pounds through June 2015, about 40 percent higher than the same period one year earlier. Imports of lean beef for processing from Australia, New Zealand and Uruguay have remained above year-prior levels through the first and second quarters of this year. Imports of thermally processed beef from Brazil and fresh/chilled beef from Mexico have also been higher year-over-year.
Nonetheless, imports from Australia have posted the largest gains year-over-year as a result of lingering drought conditions and brisk herd liquidation. Despite increased herd liquidation in Australia, cattle prices have remained high due to the strong global demand for beef, especially from the U.S. From January through June, total beef imports from Australia were up a little more than 65 percent.
It is expected that imports of processing beef will remain brisk through the third quarter as a result of low cow slaughter, the strong demand for processing beef and competitively priced imported product. Fourth-quarter imports remain unchanged from the previous month’s estimate, and total U.S. beef imports for 2015 are forecast at 3.4 billion pounds, more than 17 percent higher than year-earlier levels.
According to the most recent monthly export data, declines in beef exports to top destinations such as Japan, Mexico and Hong Kong have more than offset increases in beef shipped to South Korea during the first half of the year. January-June total beef exports to South Korea were up approximately 8 percent relative to the previous year.
However, growth in overall beef exports so far this year has largely been obstructed by a stronger U.S. dollar and sluggish global demand for relatively high-priced U.S. beef. Total beef exports through June were reported a little more than 9 percent lower than the same period in 2014.
Top U.S. beef export markets such as Mexico, Canada and Hong Kong have all shown noticeable declines through the first half of the year. Beef exports to Japan were higher year-over-year through April but began to fizzle in May and June. The USDA lowered both third- and fourth-quarter beef exports by 25 million pounds, as the above factors will likely continue to be a drag on exports through the remainder of the year. Total beef exports for 2015 are expected to reach 2.3 billion pounds, about 8 percent lower than 2014.
Live cattle imports through the first half of the year were approximately 5 percent lower than a year ago. Imports have been higher from Mexico (approximately 14 percent higher January-June, year-over-year), but the U.S. has experienced a significant decline in live cattle imports from Canada (about 22 percent lower year-over-year for January-June). The USDA reduced forecasts for live cattle exports in both 2015 and 2016 as a result of weaker demand.
Kenneth Mathews is coordinating analyst for the USDA Economic Research Service. Analyst Mildred M. Haley assisted with this report.
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Kenneth Mathews
- Market Analyst
- USDA – ERS
- Email Kenneth Mathews