KANSAS CITY — The US Dept. of Agriculture, in its July Livestock, Dairy and Poultry Outlook, forecast higher pork and beef production and lower prices for hogs and cattle in 2018 than in 2017. Previously, the USDA estimated July 1 cattle-on-feed up 4 percent from a year earlier and the highest since the data series began 22 years ago, and the June 1 US total hog inventory up 3 percent from a year ago and the highest since records began in 1964. Exports of pork and beef were forecast to increase from 2017, but tenuous trade relationships with some major export destinations add a level of uncertainty. As a result, there is no shortage of red meat.

The outlook for pork is perhaps the most difficult to discern, and the riskiest. The stakes are high since about 22 percent of total US pork production is exported. The largest export market for US pork is Mexico, taking 33 percent of the total in 2017, followed by China/Hong Kong at 20 percent and Canada fourth at about 9 percent. Mexico imposed 10 percent tariffs on most US pork on June 5 and increased those to 20 percent on July 5, although pork exports to Mexico were up about 5 percent in May, while exports to China/Hong Kong were down 45 percent. China’s duties on US pork total about 80 percent when including a pre-existing 10 percent value-added tax along with two tariff increases.

Still, hog numbers keep increasing, although slaughter hog profits were forecast by one analyst at less than $2 per head in 2018 compared with $21 in 2017.

“The (hog) industry has been setting quarterly inventory records almost since 2015, and litter rates have been consistently breaking records, mostly since the early 2000s, interrupted only by serious disease outbreaks in 2014,” the USDA said in its Outlook report. And there appears no let-up in sight. “One aspect of the report that likely fell outside most expectations was the extent of the expansion of the breeding inventory,” the USDA continued, noting that the nation’s breeding herd on June 1 increased more than 3 percent, or by more than 200,000 head, more than 60 percent of which was in states proximate to new processing facilities in Michigan, Minnesota and Iowa.

Prices for barrows and gilts (slaughter hogs) were forecast by the USDA to average between $45 and $46 per cwt in 2018, down 10 percent from $50.48 per cwt in 2017, and drop further to $40 to $44 per cwt in 2019.

Beef should fare somewhat better, at least on the export front, with about 11 percent of total production exported. Japan was the largest importer of US beef in 2017, taking 24 percent, followed by Mexico at 19 percent, South Korea at 16 percent, Hong Kong at 10 percent and Canada at 9 percent. Canada put a 10 percent tax on some US beef, while China added tariffs of 37 percent. Beef exports have been higher than a year ago for every month (through May) of 2018, with May exports up 21 percent and up for all major destinations except Hong Kong (down 2 percent), the USDA said. Demand has remained strong from the three major Asian markets of South Korea, Japan and Taiwan.

Placement of calves in feedlots, slaughter numbers and weights and ultimately beef supply have been affected by ongoing drought across parts of the Great Plains and the intermountain region, the USDA noted in its Outlook report. That resulted in more cattle moved into feedlots at lighter weights that ultimately were sold for slaughter at lighter weights. The drought also contributed to increased cow and heifer slaughter as pastures could not support as many livestock, with cow slaughter expected to increase in the second half of 2018.

Total US cattle inventory on July 1 was up 1 percent from a year earlier, suggesting the cattle herd still was growing but at a slower rate than in the past few years. Perhaps more importantly, the number of beef replacement heifers was down 2 percent from a year ago, suggesting the multi-year expansion was slowing or coming to an end, which will have a longer-term impact on beef supply.

Slaughter steer prices were forecast by the USDA to average between $114 and $117 per cwt in 2018, down 5 percent from $121.52 per cwt in 2017 but firm slightly in 2019 to $113 to $122 per cwt. Feedlot profits were forecast at about $50 per head in 2018, down 79 percent from $236 in 2017.