Lee Schulz

Iowa State University Extension livestock economist Lee Schulz discusses the livestock market outlook during the Pro-Ag Outlook meeting in Greenfield, Iowa, on Dec. 1. (Journal photo by Jennifer Carrico.)

Exports continue to be very important to the red meat and poultry industries in the United States since record levels of meat are being produced.

Iowa State University Extension livestock economist Lee Schulz said 100 billion pounds of red meat and poultry have been produced in the U.S. this year. There isn’t an increase in domestic consumption, therefore the markets are relying on exports to keep prices up.

For 2017 and projected for 2018, cow-calf costs have gone down, which has helped cattle producers see better profitability. A growing cowherd through fewer cows going to slaughter and more heifers kept for replacements, has pushed slaughter cow prices higher. Calf values have also been higher than expected for the last part of 2017.

“An increase in cattle prices in the fourth quarter is very unusual. We hope this momentum will continue into 2018,” Schulz said.

Schulz said cow-calf producers and backgrounders seem to be keeping calves longer, which is helping keep the value of gain for 500- to 600-pound calves more positive. These calves generally see a low for the last two to three months of the year, but prices seem to be increasing into December.

“From the feedlot perspective, it’s smarter to place heavier cattle on feed early in the year to help capture higher selling costs when they are sent to slaughter,” he said.

The November USDA Cattle on Feed report showed an increase of 6.3 percent over the previous year for cattle placed on feed Nov. 1. October placements increased 10.2 percent and October marketings increased 5.6 percent. Schulz said marketings can put pressure on prices and to get the best profits, cattle should be marketed effectively.

Exports will become critical when these cattle are sent to slaughter since more beef will be available and will need to be sent somewhere.

Beef packers have some of the highest margins ever. A strong choice-select spread has been more common while consumers demand higher quality beef. Retailers are featuring beef specials to help move more beef domestically, but exports continue to drive beef prices.

Exports of U.S. beef have increased 14 percent in 2017, with exports to Japan increasing over 30 percent. Increases in exports are also seen to Mexico, Canada, South Korea and Hong Kong.

Pork producers have seen better prices in 2017 as production has increased as well. A steady core consumption of pork has been seen domestically, but a lot more pork is going to the export market.

“Prices have been better for pork producers in 2017, but they have a lot of space to make up to get to him profits,” Schulz said. “We must see an increase in demand to keep up with the increase of supply and keep prices up.”

The Sept. 28 USDA Quarterly Hogs and Pigs Report showed an overall increase of 1 to 2 percent for the breeding herd. An increase of 0.5 percent to 1.5 percent in total production is expected throughout the end of the year.

“We are seeing more hogs available on the open market than we have in several years,” said Schulz. “About a $2 profit has been seen for wean to finish in 2017 and we expect the same in 2018.”

Pork demand domestically and internationally continues to stay strong, which helps the profitability. Exports continue to drive prices. All major export markets have increased imports of U.S. pork. Japan has increased 22 percent, Mexico is up 32 percent, Canada up 10 percent, South Korea increased 9 percent and mainland China increased 7 percent over 2016 levels.

“Long-term U.S. pork exports are expected to increase 25 percent over the next 10 years,” Schulz said.

Poultry prices are leveling out after the 2015 and 2016 avian influenza outbreak. A slow increase in production has been seen in 2017, which has leveled out poultry prices.

Sheep and lamb production has been extremely profitable in 2017, while dairy production continues to struggle with profitability as an increase is needed in demand.

Jennifer Carrico can be reached at 515-833-2120 or jcarrico@hpj.com.

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