Following deep herd cuts spurred by high feed costs due to drought-induced shortages, U.S. beef production is dropping to its lowest point in 21 years. U.S. beef production is predicted to drop almost 5 percent next year, to 24.1 billion pounds. That drop, for the fourth in a row now, should make the U.S. cow herd its smallest since at least 1973.
Yet with retail ground-beef prices in June up 13 percent from the same time last year, wholesale beef prices dropped 12 percent since reaching a record $2.1137 a pound in late May, and cattle futures prices had dropped this year by about 6 percent. Since peaking in early May at $1.29 per pound the weekly price for cattle ready for slaughter has declined steadily to just above $1.20. Why the apparent disconnect between tightening supply and price?
USDA reports nagging drought in the western and southwestern United States continues to motivate ranchers to send cows to slaughter, which temporarily elevates supply, despite the decreasing herd size. At the same time, feedlots continue to bring in heavy-weight cattle to put on feed for finishing. Both those scenarios contribute to increased short-term beef production during the late summer and fall, exerting downward pressure on fed cattle prices. From mid-March through at least the week ending June 22, weekly federally inspected cow slaughter has exceeded year-earlier levels, with both beef and dairy cows contributing to the increased year-over-year slaughter. At the same time, weekly feeder cattle sales volumes were generally above year-earlier levels, averaging close to 2 percent above year-earlier sales.
But it's not good news; the piper is eventually going to have to be paid. USDA reported the tide turned during June, as weekly sales volumes declined by more than 15 percent year-over-year. These developments foreshadow future declines in cow inventories, feeder cattle supplies, and, ultimately, total beef production.
Market watchers predict live cattle futures prices will reverse this year's decline, easily taking them back close to the record of $1.35 per pound reached in January, and are well on their way to a record for annual 2013. As wholesale beef prices, at $1.9028 a pound, reached their highest point in four weeks this week, University of Missouri ag economist Ron Plain was predicting they would easily exceed the peak $2.1137 they set in May in 2014.
Consider the paradox of industry pundits arguing over the legality of a Chinese company owning Nebraska farmland through its announced plans in May to purchase the nation's top pork producer, Smithfield, even as a delegation of Nebraska farmers leaves for a trade mission last week to promote additional sales of Nebraska farm products in Asia. The situation underscores a market change that's been growing for decades in the food chain: U.S. farmers today are producing relatively less and less for domestic retailers and more and more to please the palates of overseas consumers.
According to one estimate, Nebraska now sends fully half its annual wheat crop to buyers outside the country. Altogether, the state sells $5.3 billion in ag products outside the United States, which according to the state ag department creates around $7 in economic activity. Now, a new report by the U.S. Department of Agriculture quantifies the scope of that international impact on commodity markets, along with the predictions for the impact to come. Highlights of the 19-page report, which you can read here, include:
Just in time for June National Dairy Month, the U.S. Department of Agriculture’s 35-page report, Why Are Americans Consuming Less Fluid Milk? A Look at Generational Differences in Intake Frequency, attempts to understand why most Americans don’t consume enough dairy products. Despite rising cheese consumption in recent years, per capita dairy consumption has long held steady at about 1.5 cup-equivalents, or only about half the amount the 2010 Dietary Guidelines for Americans recommends for anyone older than 8 years old.
Data from USDA’s dietary intake surveys conducted between the 1970s and 2000s show that Americans remain pretty stable in the portion size when they drink milk. On the occasions they drink fluid milk, they typically consume about a cup. The change has come in consumption frequency. Between the 1970s and 2000s, people have become less apt to drink fluid milk at mealtimes, especially with lunch and supper, reducing the total number of consumption occasions, by:
Underlying these decreases in consumption frequency, the USDA study says, are differences in the habit of drinking milk between newer and older generations. When you hold all other factors, like race and income, constant, generations of Americans born after the 1930s have consumed fluid milk less often than their preceding generations:
Those differences across the generations in fluid milk intake explain the observed decrease in per capita fluid milk consumption in recent decades despite efforts by government, dairy marketers and farmer-funded advertising campaigns to stem the decline. If that’s not bad enough news, the worse news is that the trend promises to continue. Milk-drinking habits are formed in childhood, by parents, and as today’s newer less-milk-consuming generations replace older ones, they will not only continue their habit of less consumption, but will teach it to their children, as well.
If there’s any good news to be found, it’s the fact that when Americans do consume fluid milk, they have continued to drink at least as much as they did in the 1970s. The fact that portions appear not to have decreased suggests any successful attempts at marketing or recommendations that help reintroduce milk-drinking at different times of the day should result in an upward bump in overall consumption.
Nine out of every 10 American households now own an outdoor barbecue, grill or smoker, says the Hearth, Patio & Barbecue Association. Just in time for the kickoff of the long-awaited summer grilling season, here's your look ahead at the projections for the commodities that will be occupying those devices.
Beef. The U.S. Department of Agriculture reports improved prospects for grazing in 2013 because of recent rains have bolstered prices feedlots are willing to pay for younger cattle to put on feed. Lower year-over-year supplies of beef have provided support for cow prices, indicating ranchers are considering rebuilding their diminishing herd sizes. However, that price confidence hasn't yet reached those who bid for cattle ready for market today nor for wholesale beef. With strong global demand, U.S. beef exports are expected to decline only about 1 percent in 2013. U.S. beef imports are expected to strengthen as the year progresses.
Pork. The latest quarterly USDA Hogs and Pigs report showed larger March 1 inventories farmers were keeping than compared with a year ago. That increase means commercial pork production in 2013 is expected to increase about 1 percent. February exports off sharply, with lower shipments to all major markets except Canada, should also help boost domestic supply.
Chicken. USDA's forecast for first-quarter 2013 broiler meat production was lowered slightly to 9.16 billion pounds, just under 1 percent higher than in first-quarter 2012. At the end of
February, cold storage holdings were 615 million pounds, up 8.3 percent from the previous
year. Broiler and turkey shipments in February 2013 fell from a year ago, with broiler shipments dropping almost 8 percent from
a year earlier, totaling 588.4 million pounds.
Lamb. Lamb prices declined throughout the first quarter of 2013 and are expected to weaken further during the ensuing quarters, as demand for feeder and slaughter lamb declines. Prices are not expected to show much improvement during 2013 as demand and supply appear to be well balanced. Supply is tight enough to push prices up, and demand appears weak enough to pull prices down.
Steve Kay, editor and publisher of the beef-business newsletter Cattle Buyers Weekly wrote an illuminating blog entry about his perspective on the beef-cattle situation in the country. Kay's friend, "Howard," was among the country’s 20 biggest producers of beef calves 25 years ago, before drought and other factors whittled down his herd. Howard's ranch, Kay said, had been fortunate enough to avoid the devastation of the drought that has claimed so many Nebraska ranchers. Still, Howard has no desire to grow the size of his herd. Why? Howard's answers, through Kay, paint a picture of why the U.S. cattle population continues to shrink and why expansion will likely be years away.
The only bit of good news out of Kay's story is that despite the likelihood the U.S. cattle herd will shrink for the 17th year in a row this year, the beef industry has compensated for the loss of numbers by growing increasingly productive. The 29.9 million cows U.S. ranchers managed in 2012 produced just about the same amount of beef that 34.5 million cows did in 1997. That productivity growth has come from a combination of better genetics, improved nutrition, use of growth promotants and better overall management.