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"Beef production is expected to be up about 5 percent for the
rest of 2006, while pork production may rise by 3 percent and
broiler production by 2 percent," said Chris Hurt. "These supply
pressures are expected to keep finished steer prices about $5
per hundredweight lower than during the same period last year."
Hurt's comments came as he reviewed the cattle market, where
large meat supplies coupled with difficulties exporting beef and
broilers have led to record-large domestic meat supplies in the
early part of 2006.
"Feedlot managers remained optimistic in the face of
prospects for weakening finished cattle prices and new concerns
about corn and sorghum prices," he said. "This optimism was
reflected in a large increase in cattle headed to feedlots in
March. In fact, the 11.8 million head now in feedlots with
capacity of 1,000 head or more is estimated by USDA to be the
largest April 1 number since the current report began in 1996."
First-quarter 2006 beef, pork and poultry supplies reached a
record 21.6 billion pounds, 4 percent higher than last year.
Beef production led the increases in the first quarter, with a 6
percent surge, followed by both pork and broiler supplies, up by
nearly 4 percent.
"For beef, the composition of the 6 percent increase came
from a bit over a 3 percent greater head count, which left
almost 3 percent due to heavier marketing weights," he
explained. "Export problems for beef and broilers also meant
more meat for domestic consumers.
"Beef exports to Japan were cut off again after an improper
shipment of veal in January. In addition, avian influenza in
parts of Europe and Asia lowered demand for chicken and resulted
in 9 percent less broiler exports from the United States in the
first quarter. As a result, there was nearly 5 percent more
chicken in the domestic market, which was composed of the 4
percent increase in production and an additional 1 percent in
lost exports."
Hurt said that given all the supply pressure, demand for beef
held well and prices were not as depressed as for pork and
chicken. Finished steer prices in the first quarter averaged
near $89, about the same as in the first quarter of 2005.
However, by March and April, these prices moved about $5 to $7
lower than last year as supply pressures have mounted.
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 "Large beef supplies remain in store for coming months," Hurt
said. "In the March USDA Cattle on Feed report, on-feed numbers were
reported to be up by 9 percent compared to last year at the same
time. There were 939,000 more cattle in the feedlots on April 1
compared to the same date last year.
"Texas led the way with 320,000 more cattle, followed by Kansas
with 250,000 more and Nebraska with 140,000 additional animals."
All of the 12 major reporting states increased feedlot
inventories, except for Washington. Placements were up by 5 percent,
which was more than the 3 percent increase that was expected prior
to the report. Total March placements were up 87,000 head, led by
Kansas and Nebraska, which each increased 35,000 head more than in
March of 2005.
Lighter-weight calves were popular placements in March, as calves
weighing less than 600 pounds were up 81,000 head, or 27 percent.
With some heifers still being retained to head back to brood
 cow
herds, the portion of steer and steer calves was very high, at 66
percent of all the cattle in feedlots.
Prices for finished Nebraska steers in the second quarter are
expected to average in the lower $80s, compared with about $88 last
year. Third-quarter prices may drop to an average in the mid- to
high $70s. Last-quarter prices should improve some, with prices
moving back into the low $80s.
"Cattle feeders are also watching the corn and sorghum markets
closely," said Hurt. "Concerns about the low planted acreage to
these crops, growing utilization of corn and sorghum for ethanol,
and uneasiness regarding summer weather are all contributing to
increased anxiety about the potential for higher feed costs from the
2006 crop."
[University
of Illinois College of Agricultural, Consumer and Environmental
Sciences news release] |
