Thursday, April 10, 2014

USDA pork data may deceive, while report boosts cattle bulls

By Rich Nelson

Hogs: USDA’s changes made to the pork balance may have appeared supportive. They dropped their 2014 pork production forecast by a sharp 600 million lbs to now 22.777 billion. Net exports were lowered by 210 million lbs as they expect higher U.S. pork prices to turn off some foreign demand. Pork offered to the U.S. consumer was lowered from 46.7 lbs to 45.9.

At first glance, these numbers appear bullish. However, this scenario is nowhere near where the private market suggests supplies will be. Their 2014 pork forecast is only 1.9% lower than last year. Remember that the March Hogs & Pigs report suggested producers are in expansion (more farrowings). Also, we have higher weights.

We disagree slightly with the expansion discussion, but everyone can agree on the weights. Where we disagree, and sharply so, is with their estimate of PED losses (pigs/litter). As discussed previously, the March H&P report suggests only a 3% to 4% yr/yr loss in slaughter this summer.

Cattle: USDA gave the beef trade some positive news Wednesday morning. As you know, the supply/demand report covers several agricultural commodities. USDA added a minor 25 million lbs to its 2014 beef production forecast to bring it to 24.648 billion. This change was made due to the recent pace of higher placements that we have discussed previously.

These numbers will build up summer slaughter levels. Still, they see 2014 beef production down 4.5% from last year. As imports of cow meat for the supply-starved grinding market has been strong, they added 40 million to their import forecast.

We can’t argue too much with their recognition that our beef exports have been better than you could expect given this year’s beef production deficit. The 80 million increase for exports more than offset the increase in supply. These changes brought beef offered to the US consumer number, called per capita consumption, down from 53.9 to 53.8 lbs.

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