USDA predicts higher beef totals for 2016, 2017

After some declines, the amount of nationwide beef production is projected to finish higher in 2016 than at the end of 2015, and is projected to continue its rise in 2017, according to a a recent USDA report.

After dipping from 25.7 million pounds in 2013 to 24.3 million pounds in 2014 and 23.7 million in 2015, the USDA predicts the U.S. will rebound to finish close to 25 million for 2015. The agency predicts the production could climb by another nearly million pounds in 2017.

Of all the major U.S livestock commodities — beef, pork, chicken, turkey and veal/lamb — beef is the only one to suffer a major dip in production during the early 2010s.

The shrinking supply and high demand created a price spike, however. In April 2014, the prices reached their highest mark since 1987.

On a recent broadcast of the IPTV program “Market to Market,” hosted by Mike Pearson of Grinnell, expert Ted Seifried pointed out the demand and price of pork and beef are related.

“Pork demand is very sensitive to the relationship to beef prices,” Seifried said. “And if beef prices are coming down and pork prices are still relatively high, I think we’re poaching some of that pork demand, both domestically and possibly abroad as well. I worry that if, in the long-term, if beef prices come down then I get a little concerned about that pork demand here.”

Iowa State University’s Department of Economics midsummer outlook points out even with the negotiated Iowa-Minnesota slaughter steer price for the first seven months of this year averaging $128 per hundredweight is about 19 percent less than the $159 for the same period in 2015, fed cattle typically have seasonal price lows in the summer.

Supplies are typically the largest in the summer, making one argument that prices experienced in July could be the bottom. Feedlot inventories, placements and marketings and lower carcass weights are also positive signs for what price increases could be in store for the fall and winter months ahead.

Increased production doesn’t necessarily mean more profits for cattle producers, however. Various tariffs, discounts, fees and other charges or deductions from standard payment rates often cut into any new revenue found through increased demand.

The Chicago Mercantile Exchange (CME) announced recently a $1.50 per hundredweight discount would be applied to cattle delivered to the Worthing, S.D. delivery point on the October 2017 cattle futures contract, according to the Iowa Cattlemen’s Association.

CME is also suggesting it will move to a cash-settled live cattle futures contract if price discovery and cash negotiated trade do not increase — and increase quickly — across the major cattle feeding regions.

Seifried also said American demand for beef has a base that is relatively reliable.

“In bad times, we’re still going to McDonald’s and getting our Quarter Pounders with Cheese,” Seifried said. “Beef demand, everybody wants to eat beef, that’s the country we live in — God bless America.”

Contact Jason W. Brooks at
641-792-3121 ext. 6532 or
jbrooks@newtondailynews.com