Fed beef processors in the United States face the likelihood of continued sizeable losses in the second half of 2024. Springdale, Ark.-based Tyson Foods Inc., the largest processor of fed beef, projects a $100 million to $400 million operating loss in its beef segment in fiscal 2024, which ends Sept. 30. It reported a $241 million loss in its first six months.
Such losses could continue well into 2025, as US Department of Agriculture (USDA) forecasts that beef production next year will be down 5.5% on 2024 and that live cattle prices will increase by 2.4%. They are set to average $183.50 per cwt this year, versus $175.54 per cwt last year. These changes reflect tighter cattle and beef supplies as the cattle herd continues to contract, said USDA’s Economic Research Service (ERS) in its May Livestock, Dairy and Poultry Outlook report.
Pressure on beef packers will be heightened by the fact that there are still no signs of heifer retention or beef cow herd rebuilding. This suggests that overall cattle numbers on Jan. 1 next year will be lower than on Jan. 1 this year, when the total was 87.157 million head. This was the lowest total since 1951. Cattle numbers are unlikely to start increasing for at least another year, which has negative implications for the companies that are currently building new processing plants. Questions remain as to where they will get sufficient cattle supplies to run their new plants economically.
Pork and poultry positivity
The pork and poultry, notably broiler, segments face a much more positive outlook for the rest of the year and in 2025. Pork production next year is forecast to increase by 1.2% to 28.400 billion lbs from 28.064 billion lbs this year. The higher pork production forecast derives from growth in pigs per litter that will more than offset fewer expected farrowings, ERS said. Broiler production next year is expected to increase by 1.6% from this year’s forecast of 46.805 billion lbs to 47.550 billion lbs. The modest expected increase in broiler production is based on firm demand and favorable feed prices, said ERS.
The 2025 outlook for beef production is forecast at 25.120 billion lbs, according to the ERS. Next year will mark the third consecutive year of lower production following the record-large volume set in 2022. It will be the lowest since 2015 when the sector began to rebuild following the 2009-2013 drought. Cattle supplies are expected to remain tight next year as the ratio of heifers and cows in the slaughter mix currently remains above a year ago and the five-year average, and the number of heifers on feed on April 1 was nearly equal to last year, according to the ERS.
Slaughter status
The relatively strong pace of beef cow slaughter, along with relatively large placements of heifers in feedlots in 2023 and in early 2024, will likely yield a smaller year-over-year calf crop in 2025, tightening future cattle supplies, ERS said. Total beef disappearance in 2025, measured on a per-capita retail weight basis, is expected to decline 5% from 58.1 lbs this year to 55.6 lbs. As production declines next year on the largest decline in cattle slaughter since 2013-2014, it will be partially offset by record beef imports and eight-year-low exports, ERS said.
Regarding fed steer prices in USDA’s five-area marketing region, the combination of continued large supplies of market-ready cattle in feedlots and uncertainties about the strength of beef demand has pushed demand for slaughter-ready cattle slower than previously expected, according to ERS. It forecasts a slight improvement in live cattle prices in 2025 compared to the massive gains that occurred over the past few years. Its forecast for prices is $188.25 per cwt, a 3% increase over its estimated average of $183.51 per cwt for 2024. Further tightening of cattle supplies available for placement in feedlots in late 2024 and into 2025 is anticipated to support improved prices next year, the agency reported.
The US beef trade balance is expected to show a widening deficit (imports higher than exports) in 2024 and 2025, said ERS. With domestic beef production expected to fall in 2025, annual exports are forecast at 2.500 billion lbs, an 11% year-over-year decline. As a percent of production, 2025 exports would represent about 10%, versus just under 11% in 2024. The average from 2019 to 2023 was around 12%. The combination of fewer supplies available to export, higher beef prices in the United States and increased competition from Oceania will continue to create challenges for the expansion of US beef exports, ERS said.
Source: ©DANYKUR - STOCK.ADOBE.COMBroiler uptick
The ERS quarterly broiler production projections for the remainder of 2024 are unchanged from April.
It forecasts 11,725 billion lbs in the second quarter, 11,850 billion lbs in the third quarter and 11,800 billion lbs in the fourth quarter. This would result in a yearly total of 46,805 billion lbs, an increase of 0.9% from 2023. A higher rate of growth next year is supported by favorable feed prices and expected broiler demand support, in part reflecting tighter supplies of beef.
ERS forecasts that the national composite wholesale broiler price in 2024 will average $1.27 per lb. Prices are projected to average $1.24 per lb in next year’s first quarter. But with increased production in 2025, the annual average price is projected one cent lower than the 2024 average at $1.26 per lb. The first quarter of this year saw chicken profits rebound for major processors. Tyson reported operating income of $158 million, versus a loss of $258 million a year earlier. Industry-wide profits look set to increase the rest of the year, while pork profits will be positive but small. The beef segment, however, will continue to show a lot of red ink.
High on hogs
The US pork sector in the first third of 2024 seemed to have stabilized compared to a year ago, via solid consumer pork demand, ERS reported. January-April hog prices were up 6.3% year over year and the value of the wholesale pork carcass was up more than 13% over the same period last year. It was notable that with pork production almost 3% higher in the January-April period, live equivalent prices of 51-52% lean hogs averaged $57.43 per cwt, 6.3% higher than prices over the same period last year.
Strong demand for pork is driving demand for hogs and driving hog prices higher, said ERS. Strong demand compared with last year was evident in the wholesale market in particular. In the first four months of 2024, the estimated pork carcass cutout averaged $92.09 per cwt, more than 13% higher than prices in the same period last year. While it is true that the United States exported more than 25% of commercial pork production in the first quarter of this year, compared with almost 24% last year, the majority of pork is consumed domestically, ERS said.
For the second quarter of 2024 commercial pork production is expected to be about 6.7 billion lbs, 1.5% higher than a year ago, according to ERS data. This volume is slightly higher than its previous forecast due to a slightly faster slaughter pace, while USDA data suggest that weights of packer-owned and packer-sold hogs continue to lower average dressed weights. Total 2024 commercial pork production is expected to be about 28.1 billion lbs, 2.8% higher than production in 2023, said ERS.
Quarterly 2024 price forecasts for 51-52% lean hogs should average about $63 per cwt, almost 7% higher than hog prices in 2023, ERS said. For 2025, prices should average $60 per cwt, 4% below 2024 prices. Both pork imports and exports are anticipated to increase next year from this year. Imports are likely to increase about 2% to 1.23 billion lbs, about 4% of commercial production, roughly the same as this year. Pork exports in 2025 should reach 7.6 billion lbs, almost 5% above volumes forecast for 2024.
