News

Tighter supply for US meat proteins

Jon Condon, 19/01/2012

 

The latest World Agricultural Supply and Demand (WASDE) forecasts for US beef and other meat protein supplies in 2012 changed little from December figures, but continue the broad expectation that US meat protein supplies will be tighter this year.

That is likely to underpin firm protein prices, particularly given forecasts of strong exports for all three main species – beef, pork and chicken.

The decline in US domestically-produced meat protein supplies (see chart) is due to smaller beef and broiler production. Pork production is expected to increase for the second consecutive year but the pace of the increase has so far been relatively modest.

Total domestic US beef production for 2012 is now forecast at 11.4 million tonnes, slightly higher than the forecast put forward by WASDE in December but still 4.6pc lower than in 2011.
If this forecast for beef proves accurate, it would represent the smallest output number since 2005.

US grain prices have pulled back recently but this will do little to increase beef production this year, analyst Steve Meyer from the Chicago Mercantile Exchange said yesterday. Indeed, it may have the effect of shortening supplies even more as lower grain prices make it more profitable to hold back heifers and expand.

As US producers bring fewer heifers to market, the supply of feeder cattle available to feedlots will decline, reducing total beef production. USDA will publish its results of the latest cattle inventory survey on January 27 and some analysts expect that beef cows held back for replacement will still be lower than in 2011, as producers in key areas struggle with drought conditions.

An improvement in US weather conditions (still a big questionmark), lower grain prices and record out-front US cattle futures should encourage beef cow retention in 2012, Mr Meyer said.

In other meat proteins, US pork supplies are expected to advance higher in 2012 but despite record high prices last summer, producers remain cautious. Total pork production for 2012 is now forecast at 10.54mt, 1.9pc higher than a year ago. This forecast is modestly higher than WASDE’s December number.

In Mr Meyer’s view, the key for the US pork market in 2012 remain exports. Of total pork volume coming to market this year, about 22pc is expected to go to exports. Only five years ago, pork exports accounted for only 14pc of total production, he said.

US chicken meat supplies for 2012 are forecast at 16.41 million tonnes, 2pc lower than a year ago. US corn prices may have pulled back from the record levels last summer but they remain in the US$5.50-$6 range, well above historical levels.

The current expectation is for lower US chicken meat production in the first of 2012, and flat to slightly higher production later in the year, driven largely by grain price’s impact on profitability.

 

Futures near record

In other US news, Bloomberg yesterday reported that cattle futures rallied to a record on signs of tighter US supplies and rising overseas demand for beef, boosting costs for restaurants.

Department of Agriculture data shows US retail prices for the meat reached an all-time high in November, and the cost will rise as much as 5 percent this year, more than any other food except seafood.

Cattle futures for April delivery rose 0.3pc to $1.268 a pound on the Chicago Mercantile Exchange after reaching $1.2745, the highest for a most-active contract since the commodity began trading on the CME in 1964.

Feeder-cattle futures for March settlement closed unchanged at $1.52375 a pound after reaching a record $1.53475. Prices are up 20pc in the past year..

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