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Rising Feed Costs will Cut Meat Production

Published on 11 June, 2009, Last updated at 03:49 GMT

USDA has dropped its total U.S. meat production projections for 2009 and 2010. In its monthly World Agricultural Supply and Demand Estimates report, USDA estimated pork production for this year to be 22.75 billion pounds. While market hog numbers are down a bit from last year's record-setting pace, heavier carcass weights have pushed overall pounds of pork above 2008's second-quarter levels. USDA reduced next year's pork production to 22.35 billion pounds.

Last month the agency was looking for that number to be 22.62 billion pounds. Moving deeper into the year, high feed prices, particularly for soybean meal; seasonal weight reductions; and weak prices will likely limit slaughter weights and consequently temper production. Whether sow liquidation occurs and to what degree also will determine next year's production.

The range for the average barrow/gilt price for this year is now $43 to $45 per hundredweight; down $1 to $2 from last month's estimate. For 2010, USDA predicts prices to average $48 to $51 per hundredweight. USDA notes that weakness in domestic and foreign pork demand continues to weigh on the market.

Rarely ever posting year-over-year declines, broiler production for 2009 dropped to 35.42 billion pounds from May's prediction of 35.49 billion pounds. USDA also cut 2010's level to 35.93 billion pounds from the previously predicted 36.08 billion pounds. Again, high feed prices are the motivators for the industry cuts.

The production cuts have caused USDA to raise broiler prices for both 2009 and 2010. This year's increase jumped from 80 cents to 83 cents per pound from the May estimate at 78 cents to 82 cents per pound. Next year, prices are pegged at 80 cents to 87 cents per pound, up from a range 78 cents to 85 cents per pound.

As for beef production, this year's forecast went from 26.53 billion pounds last month to 26.46 billion pounds this month. USDA cited the slower pace of fed-cattle slaughter in the second quarter and lighter average carcass weights. USDA kept 2010's beef production unchanged at 25.99 billion pounds.

Choice steer prices in 2009 moved lower to a range of $84 to $87 per hundredweight versus $85 to $88 last month. Tempering beef prices is continued weak demand, driving largely by consumers' response to the recession. Prices for 2010 were unchanged at $87 to $94 per hundredweight.


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