USDA released its long-term agricultural projections this week, and the report indicates U.S. beef and pork production will enter an expansion phase over the next few years. This will be largely in response to growing demand in export markets. The report also projects domestic food prices exceeding the overall inflation rate this year and next with lower demand for red meats, and continued high prices for feedgrains.

The report, which projects production, demand and price trends out to 2020, bases its assumptions on continuation of current government policies, trade agreements, weather and economic trends. Unpredictable disruptions in supplies or demand obviously could alter the outlook considerably.

Growth ahead for meat production

The report projects that U.S. meat and poultry production will decline in 2012, as will domestic per-capita meat consumption. But with exports remaining strong and prices high, producers will begin to expand. Beef and pork production will turn upward in 2013 and continue to grow through the rest of the decade.

The report indicates that pork production will decline in 2012 in response to lower returns this year, but by 2013, producers are expected to increase farrowings as higher hog prices and lower feed prices will eventually improve returns. The report also indicates continued gains in breeding-herd productivity and increased slaughter weights will contribute to higher pork production levels, but that increased productivity will develop at slower rates than in the past several years.

U.S. beef cow numbers will rise from about 31 million head at the beginning of 2011 to over 34 million by 2020. The total cattle inventory will drop below 92 million head before expanding to about 96.7 million at the end of the projection period. Although feed prices should decline from current levels, grain prices will remain high and encourage beef producers to keep cattle in pasture-based stocker programs for longer periods and to heavier weights.

Poultry production is projected to increase the most within the protein complex over the next decade, but that growth will be slower than what was seen during the 1980s and 1990s.

Exports drive expansion

Global economic growth and relative weakness of the U.S. dollar will bring continued expansion of beef, pork and poultry exports through the decade. The report projects beef exports down slightly this year, at 2.27 billion pounds, but increasing to 2.4 billion pounds in 2012, followed by continued increases through the decade. By 2020, beef exports are projected at 3.1 billion pounds.
USDA’s projections have pork exports growing every year, with this year’s total exports at 4.67 billion pounds followed by 4.79 billion in 2012. By 2020, the report projects pork exports at 5.58 billion pounds.

Beef and pork production follow similar trends, with beef showing slight declines in 2011 and 2012, but growth through the rest of the decade. By 2020, the report projects total U.S. beef production at 28.2 billion pounds. Pork production shows a slight decline in 2012, rebounds slightly in 2013, then grows through the rest of the decade, with 2020 production projected at 24.8 billion pounds.

Livestock prices generally will trend upward through the decade as well. The report projects live hog prices to average $55.43 per hundredweight this year and $58.55 in 2012. USDA expects live hog prices to generally increase through the decade, reaching an average of $64.28 by 2020.

USDA’s report pegs the average fed-steer price for 2011 at $109.25 per hundredweight, and $120.91 for 2012. Prices fluctuate somewhat later in the decade but remain above $120 per hundredweight and by 2020 average $127.35.  

Grain supplies remain tight

Continuing high levels of corn-based ethanol production corn exports will keep corn demand and prices high, which will keep corn acreage in a range of 90 million to 92 million acres over the projection period compared to 88 million in 2010. The report outlines continued growth in ethanol production, but at a slower rate through the rest of the decade, accounting for about 36 percent of total corn use. The growth rate assumes current tax credits and import tariffs remain in place.

According to the report, feed and residual corn use has bottomed out early in the decade. That’s mostly due to reduced meat production and increased feeding of distillers grains. Feed use of corn rises through the outlook period as meat production picks up. Food and industrial corn use is projected to rise over the next decade, as are corn exports. The report shows corn prices dropping over the next few years from the current peak, and generally stabilizing between $4 and $5 per bushel through the rest of this decade.

Higher livestock prices coupled with more stable feed prices translate to higher returns for beef and pork producers. The report shows farrow-to-finish pork producers’ cash returns for this year at a negative $11.63 per hundredweight (live basis). Next year the picture improves somewhat with losses averaging $5.54 per hundredweight. By 2020, cash returns average a positive $2.36 per hundredweight.

For cow-calf producers the report projects this year’s cash returns down slightly at $54.97 per cow. Next year the average return rises to $112.80, and by 2020 the report projects returns averaging $144.48 per cow.

Read the full report online.