Most U.S. pork producers will probably make money this year because of rising hog prices, accelerating exports and cheaper feed, the U.S. Department of Agriculture said. For similar reasons, beef and dairy producers also have improved profit prospects following a money-losing 2009 as the economy recovers, the USDA said in a report today. The nation’s beef and dairy cow herd has shrunk to the lowest level since 1951, which “sets the stage for a potential reduction in beef production in 2010 and beyond,” the USDA said in its Livestock, Dairy and Poultry Outlook. In pork, U.S. commercial production is projected to decline 2.1 percent this year and pork available for domestic use is expected to drop 6 percent, the USDA said. That portends higher prices of wholesale pork and live hogs, the USDA said. Given the outlook for lower corn and soybean meal prices, “most hog producers will likely more than break even in 2010,” the USDA said. The USDA projects an average live equivalent hog price of $46 to $49 per hundred pounds in 2010, almost 16 percent higher than 2009.U.S. beef, pork and dairy producers cut herds in recent years as feed costs surged and the recession curbed demand, resulting in sharp declines in meat supplies. At the end of January, frozen pork inventories were down 18 percent from a year earlier and beef supplies were down 6.4 percent, a separate USDA report yesterday said. A revival in the U.S. economy and the export markets, if sustained, holds the promise of profits for beef producers, USDA economist Ken Mathews said. The economy and exports “are suffering right now, but in 2010, particularly in the second half, we expect them to improve,” Mathews, one of the outlook report’s authors, said in an interview today. “Once people start going back to restaurants and consuming the higher-value cuts, then cattle prices will follow beef prices up.” Prices for slaughter-ready cattle have already been on an upswing, meaning some feedlot operators have made “some money” on recent sales, Mathews said. Based on a cash price of $92 per hundred pounds in Southern Plains markets last week, a typical feedlot made about $6 per hundredweight, or $72 per head, Mathews estimated. For May, Mathews projects a break-even price of $86.75 per hundredweight for feedlots. With April live cattle futures on CME Group trading near the equivalent of $92, feedlots are poised to turn a similar, $6 per hundredweight profit. In 2009, feedlots lost an average of $4.34 per hundredweight, or $45 to $50 per animal, Mathews said.
Profits may be undercut by rising feeder cattle prices, Mathews cautioned.
“One of the biggest uncertainties for feedlot operators is what they’re going to be paying for feeder cattle,” Mathews said. “Supplies of feeder cattle could tighten up.”
In late trading today, August feeder cattle futures traded around the equivalent of $104.675 per hundredweight, compared with $101.225 for March. Additionally, lower corn prices may lead to more cattle placed in feedlots, possibly at lighter weights than might otherwise be the case, today’s USDA report said. “If enough feeder cattle are pulled forward, both slaughter and beef production could be higher than previously anticipated,” the USDA said. In dairy, even with lower feed costs, the U.S. herd and milk production are expected to shrink further this year in a continued response to weaker prices last year, the USDA said. The milk cow herd will fall to 9.015 million head in 2010 from 9.2 million in 2009, the USDA estimated. Milk per cow is forecast to increase to 20,950 pounds, up 1.8 percent from last year. Declining corn prices will help shore up producer margins, the industry’s response will likely be muted, the USDA said. “While the improved producer profit outlook is unlikely to launch an expansion, it could limit the rate of decline this year, the USDA said. Class IV milk is expected to average $13.95 to $14.75 per hundred pounds this year, while Class III milk is expected to average $14.90 to $15.60, the USDA said.
Source: www.cattlenetwork.com
