Source: Tom Johnston, MEATINGPLACE, 12/26/11

Another signal of tight U.S. beef supplies, a disproportionally large cow slaughter has kept average dressed weights lower during 2011 than if steers had accounted (as they usually do) for more of total beef slaughter, USDA said in its latest Livestock, Dairy and Poultry Outlook report.

Through Nov. 26, cumulative weekly federally inspected cow slaughter was 4.3 percent higher than in the same period in 2010 and 14 percent greater than the same period in 2009. Given that beef cows generally have lower dressed weights than steers, heifers or bulls, the atypically large proportions of cow slaughter have lowered average dressed weights for all cattle.

Feeder cattle prices have had year-over-year increases every month since December 2009. “Increasingly scarce supplies of feeder cattle, especially heavier, older yearlings, make it likely that feeder cattle prices will continue high for the next two to three years until calf crops begin increasing year over year,” USDA said, noting relief won’t come until expected lower corn prices and feed prices materialize in 2012 or 2013.

USDA said March was the only month in 2011 in which there weren’t higher year-over-year placements of feeder cattle weighing less than 600 pounds, which has caused an atypical inversion of price premiums between Central and Southern Plains fed cattle prices.

Despite high fed cattle prices, profit margins have remained at breakeven levels or lower. Cattle feeders continue to place expensive feeder cattle in anticipation of higher fed cattle prices in 2012 when supplies of fed cattle are expected to become scarce.

But packers aren’t as likely to pay the record or near-record-high prices for fed cattle because their margins are negative at a time when packer margins typically recover. Negative margins also have prompted packers to reduce slaughter numbers.

Exports/imports
A declining cattle inventory here and abroad is one factor driving robust U.S. beef exports in 2011, in which they’re forecast to increase 21 percent to 2.78 billion pounds. South Korea (up 45 percent through October), Japan (up 31 percent) and Canada (up 33 percent) are driving the trend.

In 2012, U.S. beef production is expected to fall by 5 percent, squeezing export supplies, but continued strong demand will keep beef exports about even with 2011 levels.

U.S. beef imports for 2011, meanwhile, are expected to be down 11 percent to 2.05 billion pounds. Tight global beef supplies will continue in 2012, when U.S. beef imports are forecast to increase by 2 percent to 2.09 billion pounds.

For more stories, go to www.meatingplace.com.