Beef production down in supply/demand report

Jun 15, 2012

USDA last week released its monthly World Agricultural Supply and Demand Estimates report. Overall, projections contained few surprises in crop commodities. Beef production was down despite overall meat and poultry projections being adjusted up from May’s expectations.

Overall beef production expectations were down compared to 2011, and annual projections were lowered in June compared to May’s predictions. USDA noted that heavier carcass weights were not enough to offset the decline in steer and heifer slaughter.

USDA projections for beef production in 2012’s second quarter (12Q2) stands at 6.49 billion pounds. This is down from 11Q2 beef production at 6.56 billion pounds. Expectations of the following 2012 quarters are similarly depressed as compared to 2011 with 12Q3 at 6.43 billion pounds vs 6.74 billion pounds, and 12Q4 at 5.89 billion pounds vs 6.49 billion pounds.

Overall annual production expectations are correspondingly down for 2012 compared to 2011. Last year saw beef production at 26.2 billion pounds while current expectations for the year are 25.09 billion pounds. This is 102 million pounds below May’s projected beef production.

Despite the production drop, projected quarterly prices per hundredweight (cwt.) are up for all quarters compared to 2011. Projected 12Q2 average price per cwt. is $120-123 in the 5-Area direct sales across all grades, compared to 11Q2’s average of $112.79. The annual average projection as of June is $123-128 compared to 2011’s annual average of $114.73.

Projections of U.S. meat supply and use in June are steady with earlier May projections. Beginning stocks of beef were estimated in May at 600 million pounds and ending stocks were estimated at 575 million pounds. June projections have remained the same.

Per capita beef availability dropped by 0.1 percent from 55.8 pounds per person to 55.7 pounds per person. This is down from 2011’s per capita beef availability of 57.3 pounds.

Anticipated imports rose from May to June by 7 million pounds and projected exports fell by 52 million pounds.

Overall production expectations of meat—including beef and veal, pork, broilers, turkeys, lamb and mutton—in 12Q2 vs. 11Q2 are down, from 23.11 billion pounds to an expected 23.07 billion pounds. Despite this, the annual production expectations for 2012 rose in June over the earlier May expectations, from 91.83 billion pounds to 92.14 billion pounds.

Overall beginning stocks of all meat and poultry estimates remained steady with May projections at 1.97 billion pounds, but ending stock estimates rose slightly from 2.08 billion pounds to 2.13 billion pounds. Export expectations increased and import projections decreased, but this was offset by increased projections in production.

According to the USDA and CME, the increases in anticipated overall meat and poultry production came from the pork and broiler sectors, with increases in both production and carcass weights offsetting lower production in beef.

U.S. wheat beginning stocks projections for 2012/13 were lowered in the recent report, from 768 million bushels in May to 728 million bushels. Both projections are well below the 2011/12 estimate of 862 million bushels. Ending stocks were similar, both being lowered in June to 694 million bushels, and down from 2011/12’s estimated 728 million bushels.

Anticipated farm prices paid per bushel for 2012/13 stayed basically stable with prior estimates at $5.60- 6.80, but this is down from 2011/2012’s $7.25 paid per bushel.

World wheat production estimates for the 2012/13 production year were lowered 7 million tons from May expectations. Beginning stocks dropped 1.5 million tons and world production expected is down 5.5 million tons. Most of this is attributed to increased global consumption in 2011/12 and weather in some top-producing countries hampering projected yield.

Estimates for corn and feed grains production and beginning stocks stayed stable with earlier projections. Compared to the 2011/12 production year, estimates for the 2012/2013 production year see beginning stocks of corn falling 277 million bushels to 851 million bushels, but sees overall production increasing 2.43 billion bushels to 14.79 billion bushels.

Projections for feed grains followed a similar pattern with 2012/2013 beginning stocks dropping compared to the 2011/2012 production year—24.2 million metric tons (mmt) vs. 32.3 mmt— but overall production being higher—389.6 mmt vs. 323.5 mmt.

Several analysts and groups voiced uncertainty regarding USDA’s information regarding corn.

“The weather outlook is indicating some additional moisture and less heat than previously forecast,” said Andrew Gottschalk of Hedgers Edge. “That said, it is still too early to feel comfortable with the recent USDA yield forecast.”

CME also noted a less than comfortable position with corn projections given recent weather.

Expected world corn production rose 4.2 million tons compared to May’s projections. A lot of this is attributable to China’s increase in corn-planted land. This, however, takes land away from soybeans.

Soybeans saw unchanged production estimates compared to the May USDA projections. At 3.21 billion bushels, however, these estimates put the 2012/2013 production year above the 2011/2012 production year, which had 3.06 billion bushels produced. Ending stocks, however, were reduced 5 million bushels from May’s estimates.

Estimated average farm price for soybeans in June remained steady with earlier estimates at $12-14 per bushel, but this is above the $12.30 per bushel average received in the 2011/2012 production year.

As mentioned, global soybean production expectations have been reduced since May. Much of this stems from China’s diverting more land into the production of corn and away from the production of soybeans. — Kerry Halladay, WLJ Editor