Higher fed cattle weights to lift 2018 production: USDA
USDA lowered its 2017 U.S. commercial beef production forecast slightly from last month to 26.6 billion pounds, but boosted its 2018 forecast by 20 million pounds to 27.3 billion pounds on heavier fed cattle weights during the year, according to USDA’s latest Livestock, Dairy and Poultry Outlook report.
These heavier weights reflect the likelihood of increased overall placements of heavier cattle because forage conditions in some parts of the country are expected to offer cow-calf operators and backgrounders more flexibility in timing the sales of calves.
According to USDA’s Cattle on Feed report for August, placements were up about 3 percent, and marketings were 6 percent higher year over year. The placement of calves over 800 pounds was up 8.1 percent, and the proportion of these heavier weights to all cattle placed was the highest for August since the series began in 1996. The availability of winter pasture is expected to shift some fall placements to late winter and spring 2018.
These first-half placements are likely to be marketed in the second half, supporting larger year-over-year second-half beef production. Placements during the first half of 2018 will likely be above 2017 as supplies of cattle outside feedlots are relatively large.
Large Q4 marketings to pressure fed cattle prices
For the week ending Oct. 6, wholesale Choice beef prices averaged
$197.39/hundredweight (cwt), almost 7 percent above 2016 levels. However, prices still remain below 2014 and 2015 levels, reflecting more beef production and competition from abundant supplies of pork and poultry.
Large numbers of fed cattle and increases in carcass weights are expected to result in just over 7 percent more beef year over year in the fourth quarter of 2017. This will likely pressure wholesale Choice beef prices, USDA predicted.
Recent large supplies of market-ready cattle have prevented the USDA five-area fed steer price from rebounding off recent lows. In July, the monthly weighted average price for fed steers was $118.45/cwt and trended lower through September to $107.11/cwt for a quarterly average of $112.46/cwt.
USDA’s third-quarter estimate is slightly below prices last year, but the latest weekly price of $109.45/cwt (as of Oct. 6) is about 8 percent higher than the same week last year. As a result, USDA left its fourth-quarter fed steer price unchanged from last month to $108.00-$112.00/cwt, staying above 2016 for the quarter.
The forecast for 2018 fed steer prices also remains unchanged.
U.S. beef exports for 2017 and 2018 revised upward
The volume of U.S. beef exports in August 2017 was up 14.7 percent (up 34 million pounds) from the same period last year to 264 million pounds. Shipments to major export destinations—Japan, Hong Kong, Canada and Mexico—were higher during this period. Moreover, cumulative beef exports for January through August 2017 have maintained the pace from last month of 14.5 percent above year-earlier levels.
The USDA/FAS Export Sales Report indicates a continuation of this export pace in September.
U.S. beef exports to Japan during August 2017 were 39 percent higher than the same period last year despite the implementation of the frozen beef safeguards in August. Japanese importers are more than likely substituting frozen beef with chilled beef during the implementation of the safeguards.
USDA increased its 2017 beef export forecast by 50 million pounds from last month to 2.83 billion pounds on stronger than anticipated demand from major export destinations.
The agency also raised its 2018 beef export forecast from last month to 2.91 billion pounds based on the continued competitiveness of U.S. beef.