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Demand High and No Cut in Livestock Expected

by 5m Editor
22 January 2008, at 11:38am

US - Farm prices are unbelievable - and if you are a livestock producer on the consuming end of corn and soybean meal, then that high price is a high cost, and loading up losses, writes Stu Ellis of University of Illinois Extension.

In a report for America's Farms.Com, he says that although domestic and foreign consumers are creating strong demands for beef and pork, the high numbers of animals heading to slaughter coupled with the high cost of production have put many producers in the red.

So, what are the prospects for reversing that trend, he asks.
USDA's latest Livestock, Dairy, and Poultry Outlook and Feed Outlook indicate that livestock numbers are increasing, which will decrease prices. Also grain fundamentals are pointing to higher prices - both factors are not good for livestock producers.

Pork market.
Farrowings, pick crops, and litter rates were all projected upwards in the December Hogs and Pigs report which pointed to continued production increases in 2008, along with lower prices and financial losses for producers. The December report adjusted the June 2007 reports to add 1.1 million head that were previously unreported and another 941,000 to the September report, and those adjustments added to the 9.5% increase in fourth quarter production. USDA economists say the farrowing intentions now for 2008 will raise production by 3.7 per cent over 2007.

Resulting market prices are forecast to be 9 per cent below 2007 with lean hog prices ranging $41 to $44 per cwt.

Feed market
Feed grain supplies are up 16 per cent from 2006/2007, but multiple sources of demand have pushed prices above year ago levels. For the Sept. to August grain marketing year, feed use per grain consuming animal unit is 1.71 tons, but less than the 1.82 ton level in 2005/2006 when prices were lower and DDGS were less plentiful. Feed needs are expected to be strong throughout 2008 and will surpass 2007.

The key reasons are:
  • Increase livestock numbers means more animals to feed
  • Ethanol production will be maintained I
  • increase export opportunities due to world shortages and growing demand
  • Global economics

Summary

The outlook for production and cost in the US livestock industry could nearly be the 'perfect storm', says Mr Ellis.
Pork production continues to rise, beef cattle are being forced to the market earlier than would be expected, and poultry production remains high with more anticipated. At the same time, high feed costs have continued to increase further because of demand from competing purchasers. While feed supplies will be restocked next fall, demand will remain high, but reduced livestock production is not foreseen in calendar 2008.

5m Editor