US sees brighter profit outlooks for beef and pork

 

 

Most US pork and beef producers are expected to profit this year due to rising hog prices, accelerating exports and cheaper feed, according to the USDA.

 

Dairy producers are also expected to have improved profit prospects following a money-losing 2009 as the economy recovers.

 

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.

 

According to the USDA, in pork, US commercial production is projected to decline 2.1% this year and pork available for domestic use is expected to drop 6%.

 

That portends higher prices of wholesale pork and live hogs, the USDA said. Given the outlook for lower corn and soymeal prices, ''most hog producers will likely more than breakeven in 2010,'' the USDA said.

 

The USDA projects an average live equivalent hog price of US$46-49 per hundred pounds in 2010, almost 16% higher than 2009.

 

US 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% from a year earlier and beef supplies were down 6.4%.

 

USDA economist Ken Mathews believes that a revival in the US economy and the export markets, if sustained, holds the promise of profits for beef producers.

 

Mathews said prices for slaughter-ready cattle have already been on an upswing, meaning some feedlot operators have made profits from recent sales.

 

Based on a cash price of US$92 per hundred pounds in Southern Plains markets last week, a typical feedlot made about US$6 per hundredweight, or US$72 per head, he estimated.

 

For May, he projects a break even price of US$86.75 per hundredweight for feedlots. With April live cattle futures on CME Group trading near the equivalent of US$92, feedlots are poised to turn a similar, US$6 per hundredweight profit.

 

He noted that in 2009, feedlots lost an average of US$4.34 per hundredweight, or US$45-50 per animal. But, profits may be undercut by rising feeder cattle prices.

 

In addition, lower corn prices may lead to more cattle placed in feedlots, possibly at lighter weights than might otherwise be the case.

 

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% from last year.

 

Declining corn prices will help shore up producer margins, the industry's response will likely be muted, the USDA said.