CME: Livestock Production Above Year Ago Levels

by 5m Editor
5 April 2011, at 9:30am

US - Beef, pork and poultry production remain above year ago levels largely due to heavier animals coming to market, write Steve Meyer and Len Steiner.

Overall cattle carcass weights for the week ending 2 April were reported at 772 pounds, 1.3 per cent higher than a year ago. Steer weights are reported with a two week lag but the latest data showed steer weights at 829 pounds (dressed wt.), 9 pounds or 1 per cent higher than a year ago while fed heifers at 774 pounds were 15 pounds or 2 per cent higher than a year ago. Cattle slaughter for the week ending April 2 was 640,000 head, 1.4 per cent higher than a year ago. We estimate that total steer and heifer slaughter for the week was 513,000 head, 3.2 per cent higher than a year ago while cow and bull slaughter is estimated at 127,000 head, 5 per cent lower than a year ago. The decline in cow slaughter has further limited the supply of grinding beef in the marketplace and lifted lean beef prices to all time record highs. The shortage of grinding beef has become even more apparent due to limited imports from Australia and Canada. Ground beef demand picks up significantly in late April and early May as retailers prepare for Memorial Day weekend holiday, often seen as the unofficial start of the grilling season. Modest increases in fed beef slaughter will contribute to the ground beef supply. Keep in mind, however, that this will be very expensive ground beef as cattle prices hover around $120/cwt. Lean 90CL beef trimmings are currently priced above $2/cwt and if current trends continue, and we see the normal pickup in demand, lean beef prices could be as high as $2.10—$2.20/cwt. These may seem far fetched prices but so did cattle prices at $120/cwt. Many end users remain short bought, afraid of a correction and opting to go hand to mouth. With plenty of pent up demand, it remains to be seen how overall beef prices and particularly grinding beef prices respond this grilling season.

Pork production for the week ending April 2 was 443.7 million pounds, 0.6 per cent higher than a year ago. Total slaughter for the week was 2.128 million head, 1.7 per cent lower than a year ago. Hog slaughter since the beginning of March is estimated at 10.668 million head, 1.4 per cent lower than the same period a year ago. These results do not fit well with the latest USDA Hogs and Pigs report, which indicated that the inventory of hogs and pigs that were over 180 pounds as of March 1 was about the same as the previous year. What could be causing hog slaughter to run below year ago levels? One factor clearly is the willingness of producers to slow down marketings in an effort to boost weights and overall pork supplies coming to market. Hog weights for the week ending April 2 were pegged at 209 pounds, 5 pounds or 2.45 per cent heavier than the previous year. Another factor that could impact slaughter levels is the supply of hogs coming to the US from Canada. Based on our analysis, the impact of reduced Canadian hog imports has been quite minimal. Because the shift in imports of Canadian feeder pigs should have been captured by the inventory survey, the only real impact would be from imports of slaughter ready Canadian hogs. We estimate that imports of Canadian hogs for the reference period (27 February - 26 March) were 93,600 head, about 8700 head or 8 per cent lower than a year ago. The reduction in Canadian slaughter hog imports during the last five weeks thus accounts for just 6 per cent of the year/year decline in US hog slaughter.