Livestock, dairy & poultry overview - beef supplies forecast to rise in 1992, likely to continue into 1993; hog prices drop after short increase in February, 1992, and producer returns expected to stay below total costs throughout year; egg prices lower for spring 1992 than previous year with increase in table-egg production up 1%; broiler production expansion to slow down from 7% growth of previous year; turkey supplies increase after 14% decline in previous year reflecting decrease in consumer demand - U.S. Dept. of Agriculture, Economic Research Service Report

Agricultural Outlook, April, 1992

Beef supplies are expected to increase for at least the next several years. The current cycle appears headed toward modest expansion, perhaps similar to the mid-1960's when little or no liquidation phase occurred. The expansion is likely to continue in 1993, with output exceeding population increases for the first time in 6 years.

After averaging $37 per cwt in January, hog prices rallied briefly in February, averaging $40 per cwt. But a continued sluggish economy, pickup in slaughter rate, and weakening beef prices dampened the rally. By the end of February, prices were below $40 per cwt, and are expected to remain at that level until slaughter rates drop seasonally in mid-to late spring.

Consumers will find plenty of eggs for the Easter season, with prices lower than a year ago. And second-quarter broiler production will likely increase to around 5.2 billion pounds, but lagging the robust 7-percent growth of a year earlier. [For the latest estimates for livestock, dairy, and poultry markets, see tables 10-16.]

Beef Output To Rise In 1992

Beef supplies are expected to increase for at least the next several years. The current cycle appears headed toward modest expansion, perhaps similar to the mid-1960's when little or no liquidation phase occurred. The expansion is likely to continue in 1993, with output exceeding population increases for the first time in 6 years.

Beef production is expected to rise 2 percent in 1992. Fed cattle marketings, after a slight dip in 1991, are expected to rise 1 to 2 percent this year, and cow slaughter may rise nearly 2-3 percent from last year's cyclical low.

Nearly all of the increase in cow slaughter will be older cows that were kept to give birth one more time. Cattle weights are expected to average near or slightly above last year's record. The largest year-to-year production increase is likely in the first half of 1992, and near to slightly above a year earlier during the second half.

Several factors will contribute to the expanding beef output next year.

* a buildup in the cattle inventory and a larger calf crop are expected this year, increasing the number of cattle available for slaughter;

* a slower pace of herd expansion means more heifers are available for placement in feedlots and eventual slaughter;

* dairy calves--previously slaughtered for veal--are being placed in feedlots in increasing numbers; and

* the gradual shift toward heavier slaughter weights is expected to continue.

Boxed beef (wholesale) prices rose over $10 per cwt from December, to around $121.50 by February, the highest since late spring 1991. However, March prices were erratic, ranging from $117 to $122 a cwt. Normally, rising wholesale prices would put upward pressure on retail prices. While retail prices are likely to rise to the mid-$2.80's per pound, additional increases are unlikely given the large meat supplies and the economy's doldrums. Retail prices for Choice beef in February averaged $2.82 a pound, well below the $2.92 of a year earlier.

After rising slightly in December, the farm-retail spread narrowed in January and February. Most of the decline in the spread occurred at the wholesale-retail level; while the farm-wholesale spread declined 9 percent from December to February, the wholesale-retail spread dipped by more than 16 percent.

Hog Price Rally Is Short-Lived

After averaging $37 per cwt in January, hog prices rallied briefly in February, averaging $40 per cwt. The rally was due to a seasonal drop in slaughter rates, speculation about increased exports to former Soviet republics, and some spillover effect from higher beef prices. But a continued sluggish economy, pickup in slaughter rate, and weakening beef prices dampened the rally. By the end of February, prices were in the high $30's per cwt, and are expected to remain at that level until slaughter rates drop seasonally in mid- to late spring. The brief price rally improved producer returns somewhat, but receipts will probably remain below total costs through most of the year. The low returns are expected to prompt producers to cut breeding inventories by late 1992. Increased culling and reduced retention of female stock will also help produce record output in 1992 and place additional supplies on the market into 1993. If producers do wait until late 1992 to cut back breeding inventories, year-over-year declines in pork production would not show up until late 1993.

For this year, production is expected to be up 7 percent, setting a record. Expanding pork supplies at sharply lower prices will ensure that pork remains attractive to consumers. Retail prices in February averaged $2 a pound, 7 percent below a year earlier. Retail prices for the year are expected to decline 8 to 10 percent from 1991.

U.S. pork imports totaled 775 million pounds in 1991, with most major sources registering declines. With large Canadian pork supplies, and a near doubling of the countervailing duty on Canadian hogs exported to the U.S., imports of pork from Canada were expected to increase. However, pork imports remained low while live hog imports from Canada increased over 1990 levels. Reduced imports from Denmark and Poland throughout most of the year, together with little increase in canned product imports for the holidays, put U.S. pork imports 14 percent below 1990.