Beef production forecast for 2019 lowered on lighter carcass weights

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piece of a grilled steak on a fork

USDA recently lowered its 2019 beef production forecast by 25 million pounds to 27.8 billion pounds, reflecting lighter expected average carcass weights in early 2019, according to the latest Livestock, Dairy and Poultry Outlook report.

At the same USDA recently boosted its 2018 beef production by 25 million pounds to 26.9 billion pounds based on greater expected steer and heifer slaughter. The steer and heifer slaughter rate per weekday in the fourth quarter is expected to be above levels for the same period last year, explained USDA analysts Russell Knight and Lekhnath Chalise in the report.  

Packer demand has increased seasonally, and strong margins this year have likely encouraged packers to be strong buyers of cattle. For the week ending December 8, the weekly slaughter estimate was 667,000 head. This would be the highest weekly slaughter total since the week ending May 19 (667,613 head).

This demand is also reflected in prices offered for fed steers in the 5-area marketing region. In November, monthly prices finally broke out of the 5-month narrow price window of $109.90 per hundredweight (cwt) to 112.20/cwt to reach over $115/cwt.

Further, for the week ending December 9, fed steer prices climbed to $118.11/cwt, though still below year-earlier levels. From last month, the forecast for fourth-quarter 2018 price for fed steers in the 5-area marketing region was raised to $113-$116/cwt.

The annual forecast for 2019 fed steer price, however, was left unchanged $114-$122/cwt.

October 2018 U.S. beef imports declined by 4.8 percent year over year to 234 million pounds. Among major suppliers, declines were from Mexico (down 19.2 percent), Australia (down 11.2 percent), and New Zealand (down 10.2 percent). However, January through October 2018 imports were only fractionally lower from a year earlier at 2.569 billion pounds.

Based on the lower October imports, the fourth-quarter 2018 forecast is revised downward by 10 million pounds to 670 million pounds, which results in the 2018 forecast of 3.004 billion pounds.

Trade data indicates that Oceanian and North American suppliers have shifted their products to Asian markets, which is likely to continue due to price incentives throughout the year. The price of imported beef (90-percent lean) in the United States has been improved in recent weeks, though it is lower than the previous year.

Relatively lower U.S. prices are likely to continue hindering shipment from key suppliers, the analysts predicted.

The 2019 beef import forecast was also adjusted downward by 40 million pounds to 3.020 billion due to expected tighter exportable supplies in Oceania.

The volume of 2018 October beef exports was 272 million pounds, up 4.6 percent from a year-earlier level.

Among major destinations, year-over-year higher exports to Japan (up 10.8 percent), South Korea (up 17.1 percent), Taiwan (up 46.7 percent), and Mexico (up2.9 percent) more than offset the declines to Hong Kong (down 17.3 percent) and Canada (down 6.9 percent).

Outside of major destinations, notable year-over-year increases were to Vietnam, Philippines, Indonesia, and Colombia. With higher exports in each month than year-earlier levels, cumulative beef exports through October 2018 were 2.627 billion pounds, up 12.3 percent year over year.

South Korea, Japan, and Taiwan contributed most of the growth, which is likely to continue due to strong domestic demand in those markets.

Exportable supplies available in the United States, along with tariff advantages over key competitor Australia, continue to enhance exports to South Korea. Based on the current pace and weekly export sales estimates for November, forecasts for 2018 and 2019 were expected to be in line with the previous month’s forecast at 3.190 and 3.265 billion pounds, respectively.

Source:; 1-1-2019

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