Red meat prices driven by tightened supplies

by Bryan Salvage
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WASHINGTON — So far in 2010, cattle and beef producers are experiencing a period characterized by a favorable pasture and feed situation and high cattle and beef prices, according to Rachel Johnson of the Economic Research Service (E.R.S.), U.S. Department of Agriculture (U.S.D.A.). But despite this favorable situation, cow slaughter continues into the second quarter at a high level relative to Jan. 1 cow inventories.

During the first quarter, U.S. beef imports decreased 19% from the same quarter last year, primarily due to decreased imports from Oceania. First-quarter imports from Australia, in particular, which has historically vied with Canada as the largest source of beef to the U.S., were 41% lower than first-quarter 2009 imports. A decline of a lesser magnitude for beef imports is forecast for the second quarter of 2010. Exports of U.S. beef, however, look to maintain strength throughout 2010, particularly with regard to Asian export markets, according to Ms. Johnson.

She adds that prices of live equivalent 51%-52% hogs are expected to continue to reflect lower supplies and recovering consumer demand. Prices will likely average $55-$57 per hundredweight (cwt), with U.S. commercial pork production off by 3.3% for 2010. Production next year will likely rebound to 2.1% above 2010. Hog prices in 2011 are expected to reflect larger supplies, decreasing 2%, to between $53-$57 per cwt. First-quarter U.S. pork exports were 1.05 billion lbs.

This year, exports are expected to be 5.7% above those of 2009. Next year, exports will likely increase 4.4% — reflecting ongoing recovery of foreign pork demand.

In 2011, broiler production is expected to increase 3%, which will follow a forecasted increase of almost that much in 2010, according to Ms. Johnson. With economic conditions expected to gradually improve, a forecast of lower feed costs and strong beef and pork prices, broiler integrators will have an incentive to expand production.

After declining on a year-over-year basis for five consecutive quarters, broiler production showed positive growth in first-quarter 2010, and it is expected to continue a positive trend in 2010 and through 2011. Turkey production in 2011 is expected to be somewhat higher than in 2010, rebounding from a production decline in 2009 and an expected decline in 2010. 

Prices for sheep/lamb have strengthened throughout the early spring and are expected to remain fairly strong with the advent of the summer months. Stronger prices are due to both supply-side tightness and improved demand, Ms. Johnson concluded.
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