However, expected first-half supplies of slaughter-ready cattle and year-over-year higher dressed weights are expected to yield continued year-over-year higher beef supplies.

First-quarter beef production is expected to be 6.2 billion pounds, almost 4 percent above first-quarter 2016. Production of 6.3 billion pounds – almost 2 percent higher year-over-year – is forecast for the second quarter of 2017.

In the fourth quarter of 2016, higher-than-expected steer, heifer and cow slaughter is expected to yield beef production of 6.6 billion pounds, more than 7 percent above a year ago.

Five-area steer price forecasts for the balance of 2016 and well into 2017 continue to reflect more-than-adequate supplies of cattle: Fourth-quarter 2016 prices are forecast at $105 to $108 per hundredweight, almost 17 percent lower than a year ago.

First-quarter prices are expected to average $104 to $110 per hundredweight, almost 21 percent below first-quarter 2016. Second-quarter cattle prices are forecast at $103 to $111 per hundredweight, about 17 percent below the same period a year earlier.

Lower cattle producer prices slowly translate to consumer gains

Lower composite retail beef prices in October reflect a continuing dynamic whereby retailers lower prices – although slowly – to buy back demand for beef that had migrated to other animal proteins as recently as the beginning of this year, when retail beef prices were more than $6 per pound.

ERS composite retail beef prices in October were $5.74 per pound, down from $6.23 a year earlier. Fourth-quarter composite beef values are expected to average in the high $5.70s per pound and in the high $5.70s to low $5.80s per pound in 2017.

October beef exports make solid gains

U.S. beef exports were 229 million pounds in October, almost 17 percent above exports a year ago. An October summary of the 10 largest foreign buyers of U.S. beef is set out below.

It is notable that the first five countries on the list – Japan, South Korea, Mexico, Hong Kong and Canada – together accounted for almost 80 percent of U.S. beef exports in October. This is down slightly from October 2015, due mainly to increased exports to Taiwan and the Philippines.

U.S. exports to Japan were 36 percent higher year-over-year in October. Japanese trade data suggests that higher imports of U.S. beef are coming at the expense of Australia and New Zealand, both of whose beef exports are lower due to ongoing cattle herd rebuilding.

World Trade Atlas data show that Australia’s beef exports are off by almost 21 percent through September. New Zealand’s beef exports through September are almost 6 percent lower than 2015.

The October export summary below also suggests that Asian markets – which accounted for 65 percent of U.S. beef exports in October versus 57 percent last year – are responding to the lower U.S. beef prices that accompanied the 6 percent increase in U.S. beef production since mid-year.

With continued increases in production and lower expected prices, fourth-quarter beef exports are expected to be 670 million pounds, almost 13 percent higher than a year ago.

Imports continued downward trend in October

Total U.S. beef imports were almost 226 million pounds in October, about 5 percent below a year ago. As with most of 2016, U.S. imports were lower in October, largely due to increased domestic beef production and tighter world beef supplies.

Imports from Oceania – where the U.S. sources significant volumes of lean processing beef – were sharply lower: Imports from Australia were off in October by 52 percent and from New Zealand by 9 percent. Imports from Uruguay, another source of processing beef, were more than 25 percent lower in October.

It is notable, however, that imports from NAFTA partners Canada and Mexico were year-over-year higher in October. Imports of Canadian beef were almost 28 percent higher than a year ago, and imports from Mexico were more than 58 percent higher.

Canadian and Mexican beef imports tend to be muscle cuts from grain-finished animals, as opposed to grass-fed products from Oceania and South America. Larger imports from NAFTA partner countries are also a likely result of the appreciated value of the U.S. dollar against the Canadian dollar and the Mexican peso.

Since January, the Canadian dollar has lost more than 4 percent of its value relative to the U.S. dollar, compared to its average value in the same period of 2015. The Mexican peso has depreciated almost 11 percent against the dollar since January.

Even in an environment of lower U.S. beef prices this year, such currency depreciations provide incentives for U.S. buyers to import Canadian and Mexican beef cuts. Fourth-quarter beef imports are expected to be 645 million pounds, about 5 percent above a year ago.

For the year, imports will likely total about 3 billion pounds, more than 10 percent lower than imports in 2015.