March 2, 2007

 

US: Lesser beef, rising corn prices, erratic hog production 
 

 

The movement of cattle slaughter in the US has become slower as cattle slaughter weights are 26 pounds (lb) lower than a year ago with feedlots aggressively shifting cattle to slaughter.  On the other hand, year-to-date cattle marketings are 4 percent more than a year ago as short-term adding has resulted to more beef to the food chain, but decreasing long-term beef availability.

 

Stocker feeder steers at 90 cents/lb are 20 cents/lb lower than a year ago. A 700 lb steer bringing US$140 per head less than a year ago for cow-calf operators as feedlot operators try to lower breakevens to cover higher feed costs.

 

Cow slaughter is running almost 10 percent higher year-to-date and should this trend continue, base cattle production capacity will be greatly diminished.

 

The US Department of Agriculture cattle report showed placement of cattle in January at 77 percent a year ago, the smallest since 1995. Less beef is a big win for hogs as they can replace hamburger meats during summer.

 

On the other hand, corn hit life of contract highs this past week, reaching US$4 a bushel taken at Chicago Board of Trade.

 

According to the USDA, the US$4 ceiling corn price can pull up world grain prices due to subsidies given to the ethanol industry as well as also increase world grain production and prices as it leads to more subsidies for every grain farmer. 

 

However, high corn costs are decreasing feed usage. Four pounds lighter hogs to slaughter, at 3 to 1 feed conversion is 12 lbs less feed per hog. Two million US market hogs per week is 24 million lbs less feed per week than a year ago or twelve thousand tonnes of feed per week. Decreased tonnage or chicken as well as beef will be more.

 

More corn planted - USA and the world - means lower feed usage, said analysts. Corn growers are pinning its hopes for the ethanol sector.

 

On the US hog front, US slaughter weights for hogs are down 4 lb a head from a year ago and the USDA expects lower hogs in the coming months.

 

Last week's US hog marketings were 2.006 million, up form last year's same week's 1.962 million, as producers continue to race hogs to market, trying to pull weights down in the face of feed costs almost double those of a year ago. The same scenario can be seen in all meat proteins.

 

US sow slaughter in the first five weeks of this year was 5.7 percent more than a year ago at 310,000 head. At 3,000 head more per week, analysts are uncertain of the sector's expansion this year. High feed prices always make fewer sows and then fewer hogs.

 

Industry experts believe the coming months will lead to a further shake-out in the US hog sector.  Producers who buy all of their feed will face huge financial challenges as opposed to those who grow most of it.

 

Pundits also claim that pork powerhouses will, for the first time in their history, be faced with the relentless challenge of high feed costs as slaughter price will stay good, but won't expand amid increasing feed prices.