August 22, 2006 

USDA: More corn, less hay to affect US livestock

Prospects for a larger US corn crop than anticipated will likely take some of the near-term pressure off livestock and poultry producers, said the US Department of Agriculture in its August outlook report. The current drought situation may lower production and increase prices of forage, which may slow the current expansion of the US cattle herd.

Meanwhile, dry conditions over much of the US cattle-producing regions continue to force early cattle movement. Forecasts of a larger crop, meanwhile, will take some pressure off adjustment as more corn is shifted to the rapidly expanding ethanol production sector, said the report.

US cattle imports began moving toward their typical summer lows during the second quarter, though imports from Mexico are showing more strength this summer than in 2005, reported the USDA. Beef imports declined significantly in the second quarter, as domestic lean beef supplies rose after farmers were led to cull cows during the drought.  US beef exports surged to 315 million pounds in the second quarter on the strength of rising exports to Mexico and Canada.

On dairy, unusually, warm weather throughout much of the US in mid-July has reduced the USDA's August estimated 2006 milk output, lifting slightly the prices for milk and dairy products than previously forecast.

The USDA report puts forecasts for pork production in the second half of 2006 and for 2007 slightly lower to reflect lower-than-expected increases of Canadian swine imports.  Q2 pork production is expected to be about 1.7 percent above a year ago. Pork production in 2007 is expected to be almost 3 percent above this year's forecast.

Broiler production is slowing as the number of chicks being placed for grow-out continues to be below a year earlier, says the USDA. The slowdown in production growth has lowered stocks and raised prices for most broiler products, but prices remain below a year ago. For eggs, 2006 prices are forecast 6.5 percent higher than 2005.

Due to uncertainties over the length of bans on trade in ruminants and ruminant products arising from BSE in the United States and Canada, the USDA has based its forecasts for 2006 and 2007 on the assumption of policies currently in place among US trading partners.

The USDA added that US beef exports to South Korea are not forecast pending implementation of import regulations by South Korea. 

For the full USDA report, click here.