Meat & Poultry Production To Remain Strong In 2000.

Red meat and poultry production in 2000 is forecast at nearly 80 billion pounds, virtually unchanged from expected record production in 1999. Increased poultry production, bolstered by continued profitability and low corn and soybean meal prices, will about offset modest declines in beef and pork output. Due to poor returns in the cattle and hog sectors, producers have reduced the number of animals kept for breeding.

Large red meat and poultry supplies, combined with a lackluster export market, will continue to pressure prices in 2000. Broiler prices will continue to decline from record levels reached in 1998. Cattle and hog prices will continue to recover some from extreme lows reached in 1998. Red meat and poultry exports are expected to remain sluggish, a trend that began with the economic problems in Asia that hammered exports in second haft 1998.

Beef production is likely to decline 5-6% in 2000 as producers retain more heifers for breeding stock and place fewer on feed for slaughter. Also, steer and cow slaughter will continue to decline, reflecting reduced cattle inventories.

Current herd liquidation reduces future supplies, but adds to beef supplies in the short run as female stock--cows and heifers--is slaughtered. Although cow slaughter has been declining, too few heifers have been retained to stabilize cow numbers, much less to begin expansion.

Heifer slaughter is relatively large in 1999, and many of the heifers that might have been bred this spring and summer to begin an expansion during 2000 have already been placed on feed. These additional heifers on feed are adding to this year's beef supplies, and production is now likely to be less than 1% below the 1998 high. As the beef cow herd decline continues, the 1999 calf crop is expected to be the smallest since the late 1980's and early 1990's, and the 2000 calf crop is likely to drop even further, possibly to the lowest level since the early 1960's. Cattle inventories have been declining since 1996.

Large supplies of competing meats at relatively lower prices are likely to hold clown cattle price increases in 2000. This will result in only a modest increase in heifer retention from this year's calf crop, but will pull down an already much-reduced feeder cattle supply. Feeder cattle supplies outside feedlots on April 1 were down 4% from a year earlier. Even larger declines are likely over the next couple of years, until herd expansion begins.

Fed-cattle prices may rise to the lower $70's in 2000, up from the mid-$60's this year and $61.48 in 1998. Prices are not expected to rise to the upper $60's until late this year, and then only if female retention increases. Similarly, prices for heavier yearling feeder cattle will remain under pressure until fed-cattle prices rise and supplies decline further. Feeder cattle prices may average in the lower $80's next year, the highest since 1993.

Pork production in 2000 is forecast to be about 2% lower than the 18.8 billion pounds expected this year. The reduction is due to cutbacks producers made to the breeding herd starting in late 1998 and continuing in 1999. The March Hogs and Pigs report indicates that the number of report indicates that the number of animals kept for breeding was down 6% from the same period a year ago. Also, producers indicate they intend to have 7% fewer sows farrow during March-August than a year earlier. The pigs farrowed during this period should reach slaughter weight in late 1999 and early 2000. The percentage decline in the pig crop is expected to be slightly less than farrowings due to an expected rise in pigs per litter.

Retail pork prices have not exhibited the volatility of hog prices. The retail pork price index (Bureau of Labor Statistics) declined only 5% in 1998 while hog prices dropped 36%. In 1999, retail prices may drop another 1-2% due to larger pork production in first-half 1999, and because of the lag of retail price changes relative to farm price changes. In 2000, retail prices are expected to rise about 3-4% as pork production is reduced.

Poultry output is expected to remain strong in 2000, with production increases forecast for broilers, turkeys, and eggs. Net returns for processors in all three sectors were relatively attractive in 1998 and are expected to continue so during 1999. Continuation of the downward trend in feed costs for 1999 will offset some of the impact on producers of lower prices for broilers and eggs.

Broiler returns (excluding interest and overhead costs) at the whole-bird level, are expected to remain in double digits in 1999 after setting a record high at 14 cents per pound in 1998. As a result, production is expected to continue increasing in 2000 at 5-6%. Larger gains might be realized if exports strengthen over the next 12 months. Expected economic improvement in Asia will encourage U.S. poultry exports, but increased shipments to Russia, the largest U.S. market, likely will come very slowly.

Turkey production is expected to rise about 2% in 2000. Negative net returns from 1996 through mid-1998 discouraged production growth during the last 3 years. In late 1998, returns turned positive and are likely to continue into 2000, due in part to strength in the export market.

Egg returns, which have been at double-digit levels for the last three years, are expected to continue strong in 1999, and egg production is expected to continue increasing in 2000 at 2-3%.

Weaker exports of egg products have slowed output growth in the egg-breaking sector to below 5% in 1999; 3% growth is expected in 2000. Increased strength of domestic shell egg sales in 1998 led to a rise in per capita shell egg consumption as rapid as the upturn in egg product consumption for the first time since 1978. Increasing domestic consumption for both sectors of the egg market are expected to continue in 2000.

For further information, contact: Leland Southard, coordinator; Ron Gustafson, cattle; Leland Southard, hogs; Mildred Haley, world pork; Jim Miller, domestic dairy; Richard Stillman, world dairy; Milton Madison, domestic poultry and eggs; David Harvey, poultry and egg trade, aquaculture. All are at [phone]

U.S. Livestock and Poultry Products--Market Outlook

                  Beginning                          Total
                   stocks     Production   Imports   supply

                              Million lbs.

Beef       1999      393        25,628      2,705     28,726
           2000      370        24,156      2,800     27,326

Pork       1999      586        18,870        700     20,156
           2000      475        18,505        700     19,680

Broilers   1999      711        29,175          4     29,890
           2000      750        30,709          4     31,463

Turkeys    1999      304         5,212          1      5,517
           2000      250         5,332          0      5,582

                                 Million doz.

Eggs(*)    1999      8.4       6,832.0        4.0    6,844.4
           2000      5.0       6,980.0        4.0    6,989.0

                                          Consumption
                            Ending
                  Exports   stocks    Total    Per capita

                         Million lbs.             Lbs.

Beef       1999   2,435      370      25,921      66.5
           2000   2,300      365      24,661      62.8

Pork       1999   1,250      475      18,431      52.4
           2000   1,200      475      18,005      50.8

Broilers   1999   4,500      750      24,640      78.5
           2000   4,575      800      26,088      82.4
Turkeys    1999     400      250       4,866      17.8
           2000     400      300       4,882      17.8

                         Million doz.              No.

Eggs(*)    1999   190.0      5.0     5,685.9     250.2
           2000   200.0      5.0     5,774.0     252.0

                   Primary
                  market price

                    $/cwt

Beef       1999     63-66
           2000     71-76

Pork       1999     36-38
           2000     40-43

                  [cts.]/lb.

Broilers   1999     57-59
           2000     54-58
Turkeys    1999     64-67
           2000     61-67

                  [cts.]/doz.

Eggs(*)    1999     69-72
           2000     65-70

Based on May 12, 1999 World Agricultural Supply and Demand Estimates.

(*) Total consumption does not include eggs used for hatching.

See appendix tables 10 and 11 for complete definition of terms.

Economic Research Service, USDA3