More Predicted Consolidation in Livestock

by

Linda H. Smith, DTN Markets Editor

Friday, February 25

Production of most meats will be down this year as higher production costs more than outstrip relatively strong slaughter prices, speakers said at USDA’s Outlook forum here this week.

The bite was tempered in 2010 by advanced pricing of some feed needs, but that won’t be the case this year. In the longer run, the livestock industry will see further consolidation in both production and processing.

Total meat production will be about 92.2 billion pounds in 2011, according to Shayle Shagam, USDA livestock analyst. Almost without exception, producers are squeezing more production from fewer numbers.

Jan. 1 cattle inventories fell 1.4 percent and will likely fall another 1 percent during 2011, he reported. Beef cow numbers were down 1 percent, fewer heifers were retained and the calf crop likely will be down 1 percent. However, carcass weight is expected to rebound to 779 lb. about the same as 2009, from last year’s level reduced by cold weather.

This is the lowest beef cattle inventory since 1951. “The number of cattle per 100 people has fallen precipitously, added John Nalivka, president of Sterling Marketing in Vale, Ore. “But we are producing three times as much beef per cow.”

Hog inventories also are down 1.2 percent and farrowings have fallen since spring 2008, he said. “However, since the third quarter of 2007, the number of pigs per litter has risen by at least 2 percent in 10 of the 14 quarters.”

Via its federal Hog Farm Transition Program, Canada has reduced its inventory by 20 percent from its peak in 2007, said Tyler Fulton, director of risk management for H@MS Marketing Services in Manitoba, Canada. “Our industry now is at a level that is more closely matched with domestic slaughter capacity.”


Broiler production is forecast up 1 percent, at 37.3 billion pounds, Shagam said. “Following declines in broiler production in 2009, producers added to their flocks last year. Weights also are rising.” But the production increase is modest for this industry compared with past years.

In the long term, increased productivity, combined with demographics of producers, spells more consolidation, Nalivka concluded. Factors that will shape the livestock industry by dampening herd building include the rising age of producers, a more risk averse attitude, rising costs of inputs and tighter lending to producers, he said.

“Even higher slaughter prices for breeding animals may encourage selling — not buying. Breeding cows, for instance, are a very liquid product and selling them is a quick way to generate cash.”

Nalivka predicted we would see another round of consolidation in slaughter plants as well by 2012.

Linda H. Smith can be reached at linda.h.smith@telventdtn.com

(ES/AG)

© Copyright 2011 DTN/The Progressive Farmer, A Telvent Brand. All rights reserved.

Posted with DTN Permission by Haylie Shipp

 

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