Preliminary March 2021 federally inspected slaughter volume was up by 75,000 head from a year ago, totaling 2.95 million head, due to one extra slaughter day relative to March 2020.

Based on the USDA Agricultural Marketing Service (AMS) report of Actual Slaughter Under Federal Inspection, on a per-day basis, the slaughter pace through March 27 was 3.1% slower year over year for steers and heifers but 4% faster for cows and bulls. According to the AMS report for the weeks ending March 6 and 13, total slaughter was 2.6% and 1.2%, respectively, above the same weeks a year ago. This higher level of slaughter during the first two weeks of March was the result of residual animals from slaughter disruptions in mid-February’s severe weather event.

In March, cow slaughter was higher than anticipated, while steer and heifer slaughter was lower. This change in slaughter proportions – an effect of the February storm – had the additional effect of lowering carcass weights. As a result, expected first-quarter beef production was lowered 35 million pounds from the previous month. Fed cattle marketings and carcass weights were lowered for the second quarter on current data. An increase in fed cattle marketings is anticipated in the third and fourth quarters and is expected to expand 2021 beef production in the second half of the year for a full-year increase of 60 million pounds from last month to 27.64 billion pounds.

According to USDA-AMS slaughter data reported for January-March 2021, slaughter totaled 8.11 million head, about 1.9% lower than 2020 first quarter. 2021 first-quarter slaughter was the second highest behind the 2020 total, partly due to increasing forage costs that resulted in higher cow slaughter.

Fed steer and feeder cattle prices are expected to rise in coming months

Based on AMS weekly price reports for March 2021 from the Oklahoma City National Stockyards, feeder steers weighing 750-800 pounds averaged $137.13 per hundredweight (cwt), more than $10 above a year ago. In the first week of April, feeder steers averaged $142.70 cwt, higher by almost $25 than the same week last year. As a result, the outlying quarters were raised on current price strength by $6 in the second quarter and $3 in the third and fourth quarters, for an annual price forecast of $140 per cwt, up $3.50 from last month.

Fed steer prices in the 5-area marketing region for March were reported at $114.40 per cwt, almost $2 higher year over year. Price data for April 6-8 is reported at $122.14 per cwt, about 16% higher year over year and 3% below 2019 prices for the same week. Based on expected demand for cattle and relatively strong boxed-beef prices, second-quarter fed steer prices were raised by $4 to $117 per cwt, the third-quarter price was increased by $1 to $115 per cwt, and the fourth-quarter was raised $1 to $120 per cwt. As a result, this month’s annual price forecast for 2021 was raised to $116 per cwt.

Exports to South Korea and China gain; shipments to Japan, Mexico, and Canada struggle

In February, U.S. beef exports were 250 million pounds, almost 3% below a year earlier. Large shipments to South Korea and China only partially offset reduced exports to other top destinations. As Figure 1 shows, cumulative exports for January and February reached 496 million pounds, which was down just over 1% from a year ago.

In early 2021, South Korea eclipsed Japan as the top market, and China surpassed Canada to become the fourth largest, pushing Hong Kong out of the top five destinations. U.S. beef exports to South Korea – whose beef imports from the world were up in early 2021 – were driven by robust demand. Greater U.S. beef exports to South Korea are also likely related to trade data showing that South Korea’s imports from Australia are lower year over year on limited supplies of beef for export, as Australia show signs of rebuilding its herd inventory.

Exports to China reached 24.2 million pounds in February, keeping a steady pace over the last four months of 22-27 million pounds per month. Total exports to China in January and February 2021 totaled 46.8 million pounds, about 11-times greater than the same period last year. This is largely a function of several factors, including changes to U.S. market access that were implemented in March 2020. At that time, market access was expanded through recognition of the U.S. beef traceability system, updating the number of facilities that can export to China, and lifting the ban on imports of U.S. beef and beef products from animals over 30 months old. In addition, continued demand for meat protein to offset low domestic supplies of pork is expected to continue supporting China’s beef imports.

Lower U.S. exports to Japan are likely the result of reduced shipments in early 2021 to avoid triggering the safeguard in place against U.S. beef. However, on March 17, 2021, it was announced that the safeguard was triggered. A safeguard is a temporary import restriction (e.g., a quota or a tariff increase) that a country is allowed to impose on a product if imports of that product are increasing so as to cause, or threaten to cause, serious injury to a domestic industry that produces a similar or directly competitive product. Japan has imposed a 30-day temporary tariff increase on U.S. beef above the safeguard level established in year two of the U.S.-Japan Trade Agreement (USJTA). As a result, Japan has increased tariffs from 25.8% to 38.5% beginning March 18 and ending April 16. On April 17, 2021, the import tariff on U.S. beef will drop to 25%, as prescribed in the tariff reduction schedule of year three of the USJTA.

U.S. beef exports in early 2021 remain on trend with last month’s forecast for 2021, which is unchanged at 3.15 billion pounds.

Supplies from Australia and New Zealand limit U.S. imports

In February, U.S. beef imports declined 14% year over year to 199 million pounds, principally on lower shipments from Australia and New Zealand. Australia has less exportable supplies and New Zealand has increased exports to China at the expense of other markets. Additional declines from these and other major suppliers more than offset gains from Canada and Brazil. In combination with January import data, Table 1 shows that cumulative imports for early 2021 are down 52 million pounds, or 11%, from the same period last year.

Because these declines were greater than expected, the import forecast for the first half of 2021 was reduced. Specifically, the first quarter was lowered 15 million pounds to 675 million pounds and the second quarter was revised down by 20 million to 760 million pounds. In total, the 2021 annual import forecast was thus lowered by 35 million to 2.9 billion pounds.