Meat Animal Industries to Rebound

Animal industries have experienced a difficult era of very tight and sometimes negative margins due to high feed prices. Now it appears that several years of lower feed prices will become the norm, and the animal industries will be in a period of recovery.

As feed prices rose over the last eight years, per capita supplies of meat products dropped. During the $2 a bushel corn era, per capita consumption of meats in the U.S. reached 222 pounds per person. That fell to a low of 203 pounds with the record high feed prices from the 2012 drought crop when U.S. farm prices of corn were $6.89 a bushel on average.

Feed prices are already much lower. Corn prices have already dropped and soybean meal should drop further as the South American soybean crop comes to market this spring, and even more into the summer and fall with expanded U.S. soybean acreage.

Multiple years of lower feed prices are now expected, and this should give rise to an extended period of expanded meat production. Per capita supplies of meats could rise annually back to perhaps 210 pounds by 2016. It is not expected that animal production will rise back to 222 pounds, because corn and soybean meal prices are not expected to fall to their pre-2006 levels.

The rate of expansion will vary by species with poultry and pork gaining most quickly and beef lagging considerably. For 2014, chicken and pork production will rise about 3% and turkey about 2%. Beef expansion will take longer. The coming retention of heifers, beginning this winter will drag down beef supplies in 2014 and 2015 before beef production will begin to expand in 2016. But for 2014, beef supplies are expected to be down about 5%. With the decrease in beef supplies in 2014, total meat supplies will be up less than 1%, but will rise more in 2015 and 2016.

Finished steer prices in 2013 will average a record high near $126 a hundredweight. With 5% less production, 2014 prices are expected to be near $130, a new record. Prices are expected to peak seasonally in the early spring in the mid-$130’s. Feeder steers weighing 700 to 800 pounds are expected to average a record $166 per hundredweight and calf prices could top $200 at Plains state locations. Eastern Corn Belt calves will likely be $180 to $190. Brood cow operations will receive most of the benefit of record high finished cattle and much lower feed prices. Margins for cattle finishers will remain tight since there is a very limited supply of calves and feeder cattle and there is also an excess number of feedlot spaces.

Hogs should be very profitable in 2014 due to lower feed costs and thus allow producers to recapture the losses experienced from the high feed prices of the 2012 drought. Hog prices for 2013 averaged near $65 per live hundredweight and are expected to be about $66 in 2014. The strongest hog prices will occur in the second and third quarters when prices are forecast at $72 and $68. By the last quarter of 2014, more pork will begin to reach the market from the breeding herd expansion that is underway. This will moderate hog prices toward an average of about $59 by the last quarter of the year.

For 2014, hog prices are expected to average about $66 with costs at $56, profits will be around $27 per head with the greatest returns in the second and third quarters.

Consumers should expect lower chicken prices in 2014. USDA analyst expect chicken prices to be in a range from 91 to 98 cents per pound after averaging 99 cents in 2013. They expect turkey to average in a range from 97 to 104 cents per pound after 99 cents in 2013.