Source: Rita Jane Gabbett, MEATINGPLACE, 8/19/16

Beef packers have not had much incentive to bid fed cattle prices higher because of lower cutout values through much of the summer, and the expectation of higher cattle marketings during the second half of 2016 is expected to keep fed cattle prices under pressure, according to USDA.

In its August Livestock, Dairy and Poultry Outlook report, USDA predicted lower cattle prices in 2017 due to continued expansion in domestic cattle inventories , which will result in higher slaughter and beef production in 2017 than is forecast for 2016.

During July, fed steer prices were quoted approximately 21 percent below the previous year and between 22 and 30 percent below July 2014 levels.

Volatile futures markets may have contributed to some of the fluctuations in fed cattle prices, but relatively large supplies of cattle on feed and higher cattle marketings from the previous year have kept fed cattle prices in check through much of 2016.

Beef production

This year’s ample supply of beef is primarily driven by year-over-year increases in commercial cattle slaughter and heavy dressed weights. First-half commercial cattle slaughter was estimated about 4 percent higher than the previous year’s slaughter, while dressed weights averaged about 7 pounds heavier than first-half 2015 dressed weights.

Commercial beef production for the first half of 2016 was about 5 percent above the previous year at just over 12 billion pounds.

Lower overall feed costs are expected to encourage feedlot operators to feed animals longer and to heavier weights. USDA raised its forecasts for third-quarter 2016 total cattle slaughter on expectations of larger marketings and slaughter rates of steers and heifers, but the fourth quarter forecast remains unchanged.

Forward projections show a continued gain in beef production into 2017 as the increased availability of slaughter-ready cattle and generally heavier carcasses result in more beef.

Annual beef production is forecast to reach 25 billion pounds in 2016, up 5.3 percent from last year. Total commercial beef production in 2017 is forecast 3.4 percent higher at nearly 26 billion pounds.

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