Short cattle supplies, cheaper feed and a strong outlook for beef exports create a favorable environment for U.S. producers now and into 2014, according to the December Livestock, Dairy, and Poultry Outlook report from USDA.

As of early December, monthly average corn prices had dropped by almost a third from August’s monthly average price, due to good corn yields, abundant supplies, and developments toward relaxing the Renewable Fuels Standard, according to the report. Also, grazing opportunities in winter-wheat areas look good, and favorable moisture in several areas bodes well for pastures next spring.

Other key points from the report include:

  • Cattle on wheat pastures this winter will likely be market-ready during August-September. However,this influx of feeder cattle into feedlots could be somewhat mitigated or even offset if replacement heifers account for significant proportions of cattle on wheat pasture.
  • Feeder-calf prices this quarter have run at record-breaking levels, reaching an average monthly price of $162.95 per hundredweight in November for medium and large No. 1 750- to 800-pound steers in Oklahoma City. Monthly average feeder cattle prices had increased from 7 percent for 750- to 800-pound steers to 10 percent for 500- to 550-pound steers) during the August through November period, due to scarcity the effect declining corn prices have on the potential improvement in cattle feeding margins.
  • Heifers have constituted relatively large shares of feedlot placements and inventories in 2013. These high heifer proportions of cattle on feed, combined with the relatively large cow slaughter, will likely result in another year-over-year decline in total cow inventories on January 1, 2014.
  • Annual cow slaughter for 2013 is expected to be relatively large, at over 15 percent of the January 1, 2013, cow inventory, for the fourth consecutive year. Typically, a beef cow slaughter rate of around 13 to 14 percent of the January 1 total cow inventory, acompanied by a heifer retention rate of about 14 to 17 percent, will maintain a stable total cow inventory.
  • Lower corn prices and higher feeder cattle prices result in cattle feeding breakeven levels projected around $127 to $128 per hundredweight through at least the first quarter of 2014. With expected first-quarter 2014 fed cattle prices expected to average in the low $130s range, cattle feeders could experience a period of  near breakeven to positive margins during the first quarter of 2014.
  • The average dressed weight of U.S. federally inspected cattle reached a record weekly average of 807 lbs. during the week ending November 23. Dressed weights are expected to decline somewhat during 2014. Temporary suspension of the use of the beta agonist feed additive zilpaterol likely will bring lighter weights, and lower corn prices could result in lighter placements, which usually translates to lighter finished weights.
  • Despite lower expected U.S. beef production, imports are forecast at 2.265 billion in 2014, about even with levels in 2013. Imports from traditional U.S. beef suppliers will be limited by flat production, while rising demand in Asia will increase competition for beef.
  • The forecast for 2013 U.S. beef exports was raised to 2.504 billion pounds due to strong shipments in September and October. Exports during the third quarter totaled 716 million pounds, an increase of 10 percent from the previous year and the highest quarter in 2 years.
  • Shipments to Japan have increased by 47 percent since that country relaxed its import restrictions in February 2013 to permit U.S. beef from cattle aged less than 30 months.
  • For 2014, U.S. beef exports are projected to decline 8 percent, from 2013 levels to 2.31 billion pounds. A key reason is that U.S. beef beef production is forecast 6 percent lower in 2014.

Read the full Livestock, Dairy, and Poultry Outlook report from USDA.