Profits Promise to be Widespread this Year
March 7, 2014
Supplies are tight: Herds and flocks - except for chickens raised for meat - will be flat or smaller on the heels of droughts that baked fields and pastures in many regions, driving up feed costs.
Demand is rising: With the U.S. economy perking up and jobless ranks receding, consumers can afford to put more meat on the table. Exports of most red meats and poultry will also go up.
Cattle will set the pace for livestock profits. The U.S. herd is the smallest in more than 60 years and won't be expanded until at least 2016. Through 2014, the number of cattle available for slaughter will slip. Plus, world beef supplies remain tight, limiting imports and keeping exports pricey. That will push U.S. exports, by value, even higher despite a lower volume.
Fat cattle will set another record averaging up to $150/cwt., after an all-time high of $126 in 2013. Ranchers and feedlots will collect handsome profits. But packers will take losses much of the year, pinched between sky-high cattle prices and buyers who won't pay more for beef because it doesn't compete with other meats.
Dairy farms will set a record, too, riding high milk prices. The all-milk price, $25/cwt., is $5 higher than a year ago. Modestly rising domestic use of dairy products will keep milk above $20/cwt. for most of the year, even while output edges up by 2 percent. But exports, which set a record last year, will slow because of competition abroad.
Hog prices are soaring, with carcasses going for more than $100/cwt. They'll stay high at least to midyear because scant beef supplies are boosting sales of other meat. Plus soaring exports - about 22 percent of U.S. pork output this year - spell market strength. And a virus that kills baby pigs is curbing reproduction and will limit expansion to 1 percent.
Lamb prices will stay lofty this year, owing largely to scarcity, as with cattle and hogs. Carcasses are $300 to $335/cwt., up $50-$60 vs. a year ago. Flocks continue to shrink. Moreover, weather woes have hurt production in Australia and New Zealand...two leading suppliers that typically provide more than half of U.S. lamb meat. They're selling more to China and the Middle East, too.
Reprinted from the Kiplinger Ag Letter