LIVESTOCK, DAIRY, AND POULTRY August 18, 1998 August 1998, LDP-53 Approved by the World Agricultural Outlook Board --------------------------------------------------------------------------- LIVESTOCK, DAIRY, AND POULTRY is published six times a year by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20036-5831. Subscriptions to the printed version of this report are available from the ERS-NASS order desk. Call, toll-free, 1-800-999-6779 and ask for stock # LDP, $32/year. ERS-NASS accepts MasterCard and Visa. --------------------------------------------------------------------------- NOTICE: This release replaces the August 17, 1998, release. It contains retail prices and trade numbers that were not available until today. --------------------------------------------------------------------------- Due to declining resources and the need to place more emphasis on longer term market relationships, the Livestock, Dairy and Poultry Situation and Outlook will be published 6 times in 1998. The next issue is scheduled for November 17. The release time has been standardized to 3 p.m. ET. This year will mark a dramatic change from near record beef supplies from herd liquidation and record slaughter weights. In its place will be sharply curtailed feeder cattle supplies, large declines in beef production, and loss in market share in 1999. Continued beef herd liquidation of both cows and heifers this spring and summer is the primary contributor to the large beef supplies and low prices the cattle sector continues to face. Drought and poor forage conditions in many areas are forcing large numbers of beef replacement heifers into feedlots. This together with record slaughter weights are creating large beef supplies this summer through early fall and sharply lower cattle prices. Beef consumption, on a retail weight basis, will rise to near 69 pounds per capita this year, before declining to near 63 pounds in 1999 and even lower in 2000. Lower supplies will lead to stronger prices and a much needed return to profitability at least in the cow-calf sector, but also declining market share. The beef industry will face a much more difficult challenge to remain profitable when beef supplies again increase unless the sector can lower production costs relative to pork and poultry and increase quality and consistency of product in the U.S. retail market. The highest and most consistent quality beef enters the export and hotel-restaurant market. Factors Affecting Livestock Remain Favorable U.S. economic growth slowed during the second quarter, but the underlying economic conditions remain favorable and consumer confidence remains strong. Slowness in the second and third quarters is largely a result of the General Motors work stoppage and, to a still undetermined extent, the Asian crisis. The GM strike has ended and will add to fourth-quarter economic strength. However, the Asian crisis continues amid much uncertainty as to its duration and hence impact on the overall economy, particularly agriculture. While total meat exports remain relatively strong, the strength is in lesser valued products. However, given the record total meat supplies, export strength and consumer confidence are positive for the meat complex and have kept prices from being even lower. Grain Production Rises, Prices Pressured The August 1 Crop Production report projected the second largest corn crop on record at 9.6 billion bushels, up 2 percent from last years large crop. Total feed grain production is expected to rise 1 percent, as the grain sorghum crop is projected to decline 3 percent. The farm price of corn in 1998/99 is expected to average from $1.95 to $2.35 a bushel, down from $2.45 in 1997/98 and $2.71 in 1996/97. Farm level grain sorghum prices are expected to range from $1.80 to $2.20 a bushel in 1998/99, down from $2.20 and $2.34 in 1997/98 and 1996/97, respectively. As a result prospects for feed ration costs to livestock producers for late 1998 and 1999 continue to improve. Soybean production is forecast at a record high 2.82 billion bushels, up 4 percent from last year's record. Soybean meal production is expected to rise nearly 2 percent in 1998/99. The price of soybean meal is expected to average from $140 to $155 a ton, down from $187 in 1997/98 and $271 in 1996/97. Drought-Ending Rains Needed Improved fall forage conditions in the Southern Plains and much of the Southeast remain critical to ending the liquidation phase of the present cattle cycle. Even though cow herds have been reduced and this year's calf crop was weaned at lighter weights as grazing conditions declined, sufficient forage must be accumulated by late fall to carry the reduced beef cow inventory through the winter or herds will have to be cut further. It is almost impossible to justify paying prevailing prices for hay in the drought areas to carry the beef cow herd through to the uncertain possibility of improved grazing conditions next spring. Hay production on August 1 was estimated at 148 million tons, down 3 percent from a year earlier. Excellent production potential in the northern and western part of the country has been offset to some extent by lower quality due to poor harvesting conditions. Much of the southern U.S. has had a sharply reduced hay crop and supplemental feeding has been heavy in many areas. Hay production is down over 51 percent in Texas, 27 percent in Oklahoma, 25 percent in Louisiana, and 9 percent in New Mexico, these adjacent Southern Great Plains States have been especially hard hit by drought. If moisture conditions improve over the next month, these States could generate winter pasture, particularly small grain pasture, to take some of the pressure off depleted forage supplies. Alfalfa hay production is expected to rise 1 percent, but forage quality may be a problem in many northern areas. Production of other hays is expected to drop 7 percent and thus will force continued rationing of hay through the upcoming winter supplemental feeding season. Even a normal winter, in comparison to the past mild winter, would stress feeding the now reduced cattle inventory. Cattle Inventory Decline Extended The midyear cattle inventory report indicated that producers continue to delay the beginning of female retention for herd expansion and assures that beef production will decline sharply for at least the next 2 years. Dry conditions through much of the southern third of the United States this summer have forced a resumption in beef cow liquidation. Many beef replacement heifers were sold and placed in feedlots this spring, reflecting the deteriorating forage conditions. Large beef supplies from increased female slaughter and record slaughter weights will depress beef prices through early fall, but will result in sharply reduced beef supplies in 1999 and stronger prices. Beef Replacement Heifers Down The current cattle cycle began in 1991 as the first expansion from the previous cyclical low of 95.8 million head. This cycle peaked in 1996 at 103.5 million head and had declined to 99.5 million head on January 1, 1998. Cattle inventories will continue to decline for the next couple of years, with the January 1, 2000, cattle inventory almost certainly falling below 97 million head. Competing meat supplies, particularly pork, continue to increase and will largely fill the beef void over the next few years, likely at even lower relative prices. Most of the major cattle inventory numbers for July 1 indicated declines of about 2 percent each for the cattle inventory, beef cows and 1998 calf crop. But put into perspective, these figures provide a strong suggestion of where cattle inventories and beef production are headed over the next few years. The beef cow inventory is the smallest since 1992, while the calf crop would be the lowest since 1951. Perhaps the most important figures are the 6-percent decline in beef replacement heifers and the fact that heifers on feed were up from a year earlier and up sharply from 2 years ago. These heifers would have been bred this summer and calved during the first half of next year. The next opportunity to increase the calf crop won't occur until heifers are retained from this year's calf crop for breeding next summer and calving during 2000. Both factors will reduce feeder cattle supplies in 1999. The question is how dramatically supplies will be pulled down. Feeder Cattle Supplies Continue To Decline The supply of feeder cattle outside feedlots on July 1 and available to go on feed were down nearly 2 percent from a year earlier and the lowest for this date since 1993. Supplies will only get tighter over the next couple of years as calf crops decline and as some heifers are retained for herd replacement. Veal calf slaughter over the first half of this year was down 9 percent from a year earlier, suggesting that some dairy calves are priced into the stocker-feeder cattle market and out of the slaughter market. However, even further declines in calf slaughter will only slow the decline in potential feedlot supplies. Feeder cattle imports will show little increase over the next few years as the Mexican and Canadian cattle inventories are also being reduced. Feedlot operators will also face strong demand for a reduced supply of calves from stocker operators as forage conditions improve. Even normal grazing conditions will result in abundant grazing supplies due to the sharp inventory reductions on most farms and ranches. Heifers Support Production Increases Cattle on feed inventories in the 7-monthly reporting States with over 1,000 head of capacity on July 1 were 2 percent larger than a year earlier. Although steers on feed were even with a year earlier, the inventory was up 10 percent from 1996. More importantly the number of heifers on feed was up 5 percent from 1997 and up 35 percent from 1996. The only positive aspect of the heifer number is that last year many replacement heifers were sold during the summer quarter and were placed on feed. This year's summer placements are likely to decline well below the very large placements of last year. Placement weights continued well above a year earlier through spring, partially reflecting the large second-quarter heifer placements. Weights have been running heavier than a year earlier since last fall, reducing the days on feed, but also adding to slaughter weights. The marketing pace remains sluggish and slaughter weights are likely to remain at record levels through fall. Placement weights began to drop below a year earlier in July and are likely to remain down for the next couple of years as cattle feeders are forced to place at lighter weights to hold up numbers and speed up the growth process as beef production declines and prices rise. Record Beef Production Continues This year will mark a new record high for commercial beef production, but 1976 will retain the record for total beef production. Farm slaughter and production was considerably larger in 1976. This year's record will be based on commercial cattle slaughter of about 35.7 million head, down sharply from 1976's 42.7- million-head record. However, the difference is marked by a quantum leap in commercial dressed slaughter weights--up 120 pounds from 1976's 602 pounds per head. Beef production is expected to remain large through mid-fall with average weights remaining near July's record commercial dressed slaughter weight average of 730 pounds per head. Weights usually rise seasonally through mid-fall, but are likely near their peak at present as heifer slaughter will comprise a relatively larger share of slaughter through fall. Beef production this summer is expected to increase about 4 percent from a year earlier as fed cattle marketings pick up and weights remain heavy. Fourth quarter production will be down slightly from a year earlier as slaughter finally falls below a year earlier, but dressed weights set a record for the fall quarter. Cow slaughter remains below a year earlier, but given the reduced inventory, remains large. If pastures begin to improve this fall, cow slaughter is likely to decline 10 to 15 percent below a year ago, but will still remain seasonally large. Many calves in the drier areas of the country were weaned from cows earlier than normal this summer. Consequently, cow slaughter will likely rise less than seasonally this fall, particularly if anything even close to normal rainfall occurs this autumn. Beef Production To Plummet in 1999 Beef production is expected to drop sharply in 1999, reflecting the sharply reduced cattle inventory and improved grazing conditions, at least for the much smaller herd. Production is expected to decline 7 to 8 percent, with some of the sharpest declines occurring next summer as heifer retention begins. Production this winter is expected to decline about 6 percent, while second-quarter production will be down about 3 percent. Slaughter is expected to decline about 2 million head in 1999, with commercial dressed weights dropping near 1994's previous record high of 710 pounds per head. Production in second-half 1999 is expected to decline 6 to 10 percent and will set up similar large declines in 2000. The decline in production in 2000 will largely be a function of how strongly the sector retains female stock over the next couple of years. Large and expanding supplies of competing meats at already relatively lower prices suggest another relatively slow inventory expansion rate, which may be aborted as beef supplies increase and prices decline. Per Capita Beef Consumption To Drop Per capita beef consumption on a retail weight basis is projected at 68.7 pounds this year, up from 67 pounds last year and the largest since 1989. Prices for Choice beef at retail are expected to average about $2.77 a pound, down from 1997's $2.80 average. Consumption is expected to decline to 63 pounds per capita in 1999, the lowest since well before the advent of the commercial cattle feeding industry in the 1960's. Although beef prices are expected to rise as supplies plummet, large supplies of lower priced competing meats will hold down the beef price rise. Choice retail beef prices are expected to average near $2.86 a pound in 1999, the highest since 1993's record $2.93 a pound. However, in 1993 beef consumption had fallen to 65 pounds and competing meats added nearly 143 pounds of consumption. In 1999, the beef sector will have to compete against 150 pounds of other meats, which will have gained another 2 percent of the meat market. The farm-retail price spread for Choice beef averaged about the same--$1.42 a pound--in the first half of 1998 as in 1997. The spread widened in July, but will begin to tighten over the next couple of years as beef supplies decline and packers and retailers compete for the reduced supply. Cattle Prices Likely Bottomed This Summer Fed cattle prices likely hit their lows this summer averaging slightly below $60 per cwt in July. Prices will remain under pressure through mid-fall, but expectations of reduced production by late fall and throughout the next several years should cause fourth-quarter prices to reach the mid-$60's, up from near $61 this summer. Fed cattle prices are expected to rise to the low- to mid-$70's in 1999. A slowing economy and still large total meat supplies will hold down price strength. Highest prices are likely to occur in late spring to mid-summer as the summer barbeque season has to deal with the tightest supplies since 1993. Reduced world beef supplies will lead to a resurgence of prices for beef trimmings from a lower supply of somewhat lighter-weight fed cattle slaughter. Stocker-feeder cattle prices are expected to rise fairly sharply over the next few years as supplies plummet. Prices for lighter weight stocker cattle will show the sharpest gains as even normal grazing conditions would generate excess forage supplies given the declining cattle inventories. Prices for yearling cattle will show less strength as feedlot operators will have to buy these cattle at prices, that even with lower feed costs, will face large supplies of competing meats at lower prices. Cattle feeders will find it difficult to outbid the stocker operators for the reduced supply of lighter weight cattle. Feedlot inventories are expected to decline in late 1998 through the next few years, but placement weights will remain relatively heavy. Prices for Utility cows will strengthen in 1999 as cow slaughter declines and world processing and U.S. fed beef trimming supplies decline. Cow prices have been under pressure this summer due to early weaning of this year's calf crop in the dry areas and likely increased culling of the cow herd. Utility cow prices will begin to strengthen as rains begin. Assuming a resumption of more normal moisture patterns, which have already begun to some extent, cow prices could still average near $37 this summer. Prices are expected to average in the mid- to upper $40's in 1999. Beef Imports To Increase Relatively large domestic cow slaughter due to the drought, large amounts of trim from heavier weight fed cattle, and competition from pork for processing have pressured manufacturing grade beef prices. However, the offsetting strength of the U.S. dollar and the weakness in Asian markets have left few alternatives to shipping processing beef to the United States. Prices for benchmark 90 percent Chemical Lean (90 CL) beef in the first half of 1998 averaged 4 percent below 1997 and will remain depressed until late fall as cow slaughter remains high. However, once the liquidation ends [towards the end of the year or early in 1999], reduced supplies of manufacturing beef will boost prices and stimulate increased imports. Imports in 1998 are expected to reach 2.6 billion pounds carcass weight and increase 5 percent in 1999. New Zealand is the only import source that may reach its quota limits this year. Through early August, Australia, Argentina, and Uruguay had filled less than 40 percent of their respective quota allocations and are not expected to substantially increase the rate of exports before the end of the year. Drought on the east coast of New Zealand has forced a dramatic inventory liquidation and given the weakness in a number of Asian markets, product has been diverted to the United States. Likewise, Australia has been liquidating cattle in response to poor returns over the past 2 years and dry conditions. Despite the pressure these supplies are putting on U.S. 90 CL prices, the declines of the New Zealand and Australian dollars still make the United States an attractive market. The Australian dollar averaged 19 percent below its 1997 levels in first-half 1998 and the New Zealand dollar is 25 percent of its first half 1997 levels. Thus in Australian dollars, 90 CL prices are 14 percent higher and those facing a New Zealand producer are 19 percent higher. From the standpoint of a Oceanic exporter, weak exchange rates are providing considerable support for the livestock sector. Argentina's herds are recovering from the effects of the drought in 1995-96 and inventories are just beginning to expand as producer returns favor herd expansion. Cattle inventories are at extremely low levels and internal demand has boosted producer prices. In the near term, beef production could fall further as producers retain female stock for herd repopulation. The peso is pegged to the U.S. dollar, which passes the full decline in U.S. prices back to Argentine exporters. In the face of strong internal demand, plants that slaughter cattle for export are finding it difficult to bid cattle away from plants slaughtering for domestic consumption and there is little incentive for exporters to ship product to the United States. U.S. imports of Argentine beef exports could reach their lowest levels since before the early 1980's. Uruguay has benefited from increased demands for its cattle from Argentina and slaughter is expected to fall slightly in 1998. Since Brazil has emerged as a major market for Uruguayan beef, the weakness in U.S. prices has reduced incentives to ship product to the United States. The Canadian cattle herd, like the U.S. herd, has been in a contraction mode since late 1997, and herd liquidation and the weakness in the Canadian dollar have encouraged strong sales to the United States. Slaughter in Canadian plants through August 1 was 3 percent above 1997 but will likely decline towards the end of the year. This month Statistics Canada will release the midyear cattle inventory, which will likely show a continued decline. In addition to higher slaughter rates, exchange rates have played an important role in the increase in Canada's exports to the United States. The Canadian dollar had been falling steadily since late 1996 and has fallen 5 percent in the first 7 months of 1998. This has made U.S. prices attractive to Canadian producers. According to the U.S. Customs Service, beef imports from Canada through August 10 equaled about 177,000 metric tons, product weight, up 14 percent from 1997. The market for manufacturing-grade beef should tighten significantly in 1999. The cattle liquidation in the U.S. and Canada will be over and positive returns will encourage producers to retain cows to at least stabilize and probably expand inventories after returns improve. Concurrently, cattle slaughter is expected to fall off in Oceania as inventories in New Zealand are depleted. Producers in Australia, who have been slaughtering a higher than average number of cows in recent weeks, will likely increase their breeding inventories, especially if favorable weather encourages pasture recovery. Argentina has already entered its expansion phase so a modest increase in production may occur in 1999, but continued female stock retention will likely limit the increase. Thus, despite strong demand, supplies of manufacturing-grade beef will likely be limited. To have adequate supplies of imported product to meet their needs, U.S. importers will probably have to offer higher prices for 90 CL in 1999. If exchange rates remain at their current levels and Asian markets remain weak, U.S. imports will likely rise but the rate of increase could be slower than in 1998. The United States remains the dominant purchaser of manufacturing beef. Rising U.S. prices and weak currencies in exporting countries could divert product from other destinations. Export plants in Argentina, which have been unable to bid cattle away from domestic slaughter plants could respond to higher prices by increasing exports. However, if currencies in exporting nations appreciate relative to the dollar or the Asian economies recover, the effects of higher U.S. 90 CL beef prices could be lessened and the increase in imports may be somewhat less. Conversely, a furthering of economic instability in Asia could increase the amount of product shipped to the United States. Low Prices Strengthen Beef Exports Despite weakness in Asia, low U.S. prices and strong economic growth in Mexico have buoyed exports. Japan remains a strong market despite economic instability as consumers shift to lower-priced cuts of beef and U.S. prices fall to reflect the liquidation of cattle. Total exports in the first 5 months totaled 861 million pounds, carcass weight, about 8 percent higher than in 1997. However, much of the increase occurred in the first quarter and the growth in exports in April and May was about half the rate of the first quarter. Exports in the second-half are expected to be less than in 1997. Exports to Canada in second-half 1997 were boosted by the July strike at Cargill's plant at High River, Canada, a situation that won't occur in 1998. Exports for 1998 are forecast at 2.1 billion pounds, carcass weight, about 2 percent below 1997. Exports should increase about 2 percent in 1999. The economic crisis in Japan does not appear to be affecting its beef imports at the current time. Despite a weakened yen, Japan imported 10 percent more beef through May. The increase was made possible by declines in U.S. prices and more fundamentally, a shift in the types of beef imported. Importers would seem to be shifting from higher-priced cuts such as fresh loins to frozen cuts and ribs. Analysis of historic movements in unit value indicate that changes in unit value are related to movements in U.S. wholesale prices and exchange rates. The movement in exchange rates appears to have a significant but lesser impact on beef unit value changes than changes in U.S. wholesale prices. Thus the weak yen need not affect the quantity of U.S. exports as long as U.S. prices decline or the Japanese are willing to substitute lower-value cuts for traditional imports. However, beginning late 1998, U.S. prices are forecast to rise as beef production declines. If the yen continues to weaken, increased sales may be limited to the degree to which Japanese consumers are prepared to consume frozen product. Expanded imports of frozen beef also run the risk of triggering the Safeguard in May 1999. Mexico is likely to remain an exceptionally strong market for U.S. beef. It must be noted that the 50-percent increase for the first 5 months is coming off a low first quarter of 1997. Since second-quarter 1997, imports have increased only 6 percent. Low U.S. beef prices, strong economic growth, and low Mexican inventories are encouraging imports, but growth rates in the second half likely will not equal those of the first half. The Mexican National Feedlot Association recently requested that Mexico's Secretariat of Commerce and Industry (SECOFI) investigate U.S. beef exports for evidence of dumping. In the near term, the request probably will not have any impact on imports, but should SECOFI undertake the investigation, the threat of duties could have a dampening effect on U.S. trade. Expectations of higher U.S. cattle prices and the gradual weakening of the peso may serve to dampen imports towards the end of the year and into 1999. South Korea remains a wild card in attempting to forecast U.S. exports. The Korean government publicly remains committed to meeting its WTO obligations. However, the pace of imports through the first half of the year remains exceptionally slow. The U.S. has benefited from its offer of GSM export credits but at the current rate of imports, Korea will have to increase imports dramatically in the final months of the year. The price depressing impacts of releasing that much beef on the market would likely lead to complaints by producers, but the cost of storing the beef would strain government finances. Under these circumstances, a number of analysts are questioning whether Korea will be able to meet its WTO obligations. Exports in 1999 will increase slightly if the currencies of the major importing countries stabilize. Although U.S. beef prices are expected to increase, continued income growth in Mexico and lower beef production in Canada will provide support for a very modest increase in U.S. exports. Continued economic instability in Asia will dampen prospects for growth in the Pacific Rim and a further weakening could cause exports to decline. Cattle Imports To Increase U.S. live cattle imports are expected to reach about 2 million head as herd liquidation in Canada slows in the second half of the year and imports from Canada fall off. Total imports through May were up 5 percent but imports from Canada fell off substantially in April and May. It is likely that imports through the rest of the year will remain below last year and offset increased imports from Mexico. Imports from Mexico will remain strong as poor forage conditions force producers to market their animals in the United States. In 1999 cattle numbers in Canada and Mexico are expected to be below this year. As the U.S. cattle cycle turns, demand for feeder calves will increase but the lower inventories in Mexico and Canada will limit imports. Imports from Mexico may increase if continued dry conditions force further liquidation in northern Mexico, but lower numbers of heavy weight cattle for finishing or slaughter in Canada are likely to reduce imports. Pork Production Increases Depress Prices Pork production in July rose about 13 percent from a year earlier and above earlier expectations. Hog prices dropped more than $5 per cwt from June and $22 from a year ago. With production above earlier expectations and increased imports of Canadian slaughter hogs, commercial pork production is expected to be about 18.8 billion pounds this year, up 9 percent from a year earlier. Hog prices are expected to average $34-$35 per cwt, the lowest since 1974. Last year prices averaged $51.36. Low Prices Boosting Pork Exports Large U.S. pork supplies and resulting low prices pushed 1998 and 1999 pork export forecasts higher than expected earlier. The U.S. is expected to export 1,260 million pounds of pork in 1998, up 21 percent from the previous forecast, while 1999 exports are expected to reach 1,300 million pounds, 3 percent more. Through May, aggregate year-over -year pork export quantities are up over 40 percent, and the cumulated value of exports are up almost 15 percent. Driving U.S. exports and forecasts are low prices of lower valued pork cuts. The unit value of cumulated exports was $1.08 per pound through May, compared with a $1.28 per pound a year ago. Through May the largest importers of U.S pork were Japan, Russia, Canada, and Mexico. Year-over-year exports to Japan are up over 21 percent. Such comparisons are distorted however, because the Safeguard mechanism held down exports to Japan through July 1997. Continued depreciation of the yen and sluggish demand that accompanies recession temper expected export growth to Japan. Russia and Mexico--with imports of U.S pork products up 107 percent and 80 percent, respectively--are clearly responding to U.S prices of low value cuts. Through May, the unit value of exports was $.67 to Russia and $.93 to Mexico. Exports to Mexico could slow, as preferential duty quotas on carcasses, hams, and shoulders are exceeded. Forecasts of U.S imports of Canadian hogs were also increased as the depreciated Canadian dollar continued to create extremely favorable price conditions for Canadian producers. The U.S is expected to import over 3.8 million hogs from Canada this year, up 20 percent from last year. Through May, 70 percent of imported hogs were slaughter hogs and 30 percent feeders, the same proportion as last year. Butter Market Remains Strong The butter market remains strong as prices rose another 17 cents per pound between mid-July and mid-August. In general, sluggish output and strong demand for many milkfat products remain the main story. However, the spring swelling of pipeline stocks now appears to have been modest. Without large pipeline holdings to work down, pressures to reduce prices have thus far been outweighed by continued brisk fat sales and concerns about autumn supplies. Markets conditions will ease seasonally after Labor Day, before tightening again as the yearend holidays approach. This seasonal easing is expected to bring a modest adjustment in butter prices, although such declines are far from certain. With butter prices remaining strong, cheese prices have been unsettled. Block Cheddar prices rose 5 cents per pound in late July, while barrel prices slipped 4 cents. Cheese markets probably will be fairly tight during the rest of 1998. If butter prices ease and milk production starts to grow as expected, cheese prices probably will decline somewhat this autumn, even though nonfat dry milk markets are not likely to be as weak as during spring and summer. Broiler Production Increasing Slowly Broiler production increased fractionally in the second quarter of 1998, relative to a year ago. Hatchery supply flock problems limited increases in bird numbers and hot weather slowed growth rates in some of the leading southern production areas. Slightly stronger increases in broiler-type chick hatch in the second quarter, relative to the first quarter, indicate a stronger production increase in the third quarter. A recovery in slaughter weights is expected as hot weather eases in August. Production increases of about 2 percent are expected for the last half and for the year as a whole. This would be the lowest production increase since a 1-percent rise in 1982. Wholesale prices for whole broilers rose more than 20 percent between mid-May and early August, to nearly 8 cents above last year. Prices typically rise seasonally, but price increases have been stronger than normal. Slower production increases and escalating demand are probably responsible for the price increases. Currently prices are projected to set a record high in 1998. Strength in the fast food market is reflected in stronger prices for skinless boneless breast meat and wings, up about 10 percent and 20 percent from a year ago, respectively, for May through early August. Leg quarter prices have strengthened about 5 cents a pound since June and are expected to be about 15 percent above a year ago during August. Slow increases in production and strengthening exports are probably behind the increase. Production is expected to increase 5 percent in 1999 as hatchery supply flock increases and heighten producer profitability make production increases more attainable and attractive. Producer net returns are expected to be near record highs this summer as prices have increased and feed costs are expected to be about 20 percent below a year ago. Pullet hatch for potential placement in the hatchery supply flock was 15 percent above a year ago in June, the largest increase since November 1997. Turkey Net Returns Positive After 2.5 half years of negative returns for turkey producers, reductions in feed costs (27 percent below a year ago) and seasonal increases in turkey prices allowed producers to breakeven in July. Returns are expected to continue positive through the fall even though large pork supplies will limit turkey price increases. Lower feed costs are the major factor in increased net returns. Turkey production is expected to decline 3 percent from a year ago in 1998 as lower poult placements limit turkey slaughter numbers. Production is expected to be nearly unchanged in 1999 as higher slaughter weights nearly offset the decline in birds. Large Egg Prices Higher Large size egg prices are above last year in early August after being below a year ago nearly all of 1998. Hot weather in production areas typically causes more medium eggs to be produced and creates a temporary shortage of large eggs. Egg production increased nearly 3 percent in the first half of 1998 and is expected to maintain this pace for the year. Egg production is expected to continue increasing in 1999 but at a slower 2-percent rate. Copies of this publication are available through the ERS Autofax System. Using a telephone attached to a fax machine, call 202-694-5700 and request Document Number 11515. Principal Contributors - (202) 694-5180 Leland Southard, (Coordinator), Milton Madison (Poultry), David Harvey (Poultry Trade), Ron Gustafson, (Cattle), Shayle Shagam (Beef Trade), Mildred Haley (Pork Trade), Jim Miller (Dairy), Laverne Williams (Statistics) Feeder cattle supply outside feedlots -------------------------------------------------------------------------- Change from Item 1994 1995 1996 1997 1998 /3 Prev. -------------------------------------------------------------------------- 1,000 head Percent On farms Jan 1: Calves < 500 lbs 17,884 18,369 18,488 17,909 17,418 -2.7 Steers over 500 17,042 17,463 17,732 17,320 17,197 -0.7 Heifers over 500 2/ 9,068 9,275 9,949 10,199 10,018 -1.8 Total 43,994 45,107 46,169 45,428 44,633 -1.8 On feed Jan 1 1/: 12,932 12,374 12,862 13,102 13,546 3.4 Feeder cattle outside feedlots on Jan 1 31,062 32,733 33,307 32,326 31,087 -3.8 Slaughter Jan-Mar Calves 312 351 431 403 368 -8.6 Steers & heifer 6,495 6,662 7,085 7,031 7,039 0.1 Total 6,806 7,013 7,517 7,434 7,407 -0.4 On feed Apr 1 1/: 12,441 12,596 12,245 12,924 12,276 -5.0 Feeder cattle outside feedlots on April 1 24,745 25,498 26,407 25,069 24,949 -0.5 On farms July 1: Calves < 500 lbs 31,300 32,000 31,700 30,800 30,300 -1.6 Steers over 500 15,200 15,400 15,100 14,600 14,500 -0.7 Heifers over 500 2/ 7,500 8,000 8,100 8,200 8,100 -1.2 Total 54,000 55,400 54,900 53,600 52,900 -1.3 On feed July 1 1/ 10,578 11,140 9,800 10,900 11,000 0.9 Feeder cattle outside feedlots on July 1 43,422 44,260 45,100 42,700 41,900 -1.9 Slaughter Jul-Sep Calves 312 361 469 396 Steers & heifer 7,269 7,657 7,169 7,525 Total 7,581 8,017 7,637 7,921 On feed Oct 1 1/: 10,729 10,946 11,001 12,083 Feeder cattle outside feedlots on Oct 1 35,690 36,436 36,261 33,596 -------------------------------------------------------------------------- 1/ Estimated U.S. steers and heifers. 2/ Not including heifers 3/ !995-1997 data revised to incorporate July 1 U.S., and 12 States Commercial calf slaughter and production ----------------------------------------------- Year Dressed Slaughter weight Productio ----------------------------------------------- 1,000 Million head Pounds pounds 1994 I 312 228 71 II 288 236 68 III 312 218 68 IV 357 213 76 Year 1,269 223 283 1995 I 350 223 78 II 333 222 74 III 361 211 76 IV 386 207 80 Year 1,430 215 308 1996 I 432 208 90 II 405 215 87 III 470 202 95 IV 463 205 95 Year 1,770 207 367 1997 I 404 213 86 II 364 220 80 III 396 202 80 IV 411 190 78 Year 1,575 206 324 1998 I 368 185 68 II 327 180 59 ----------------------------------------------- Calf slaughter by class under Federal inspection ----------------------------------------------------------------- Bob veal Fed Other Year 150 lb & 150 to 400 lb over Total below Formula Nonformul 400 lb ----------------------------------------------------------------- 1,000 head 1991 466 790 66 86 1,408 1992 423 760 62 82 1,328 1993 324 725 45 66 1,159 1994 416 730 37 54 1,237 1995 564 740 35 54 1,393 1996 867 747 32 71 1,718 1997 757 709 25 43 1,534 I 198 175 8 11 392 II 163 175 6 11 355 III 193 179 5 10 387 IV 204 180 6 10 400 1998 Jan. 62 58 2 3 125 Feb. 49 57 2 3 111 Mar. 53 66 3 3 125 I 164 180 6 9 361 Apr. 45 57 2 3 107 May 40 55 1 3 99 June 44 64 2 4 114 II 130 176 5 9 320 -------------------------------------------------------------------------------- 7-State cattle on feed, net placements, marketings, and other disappearance in feedlots with capacity of 1,000 or more head --------------------------------------------------------------------------------- Year On Other dis feed Placement Marketing appearanc --------------------------------------------------------------------------------- 1,000 % 1,000 % 1,000 % 1,000 % head Chg head Chg head Chg head Chg 1995 Jan. 8,031 -2.7 1,631 15.2 1,484 0.2 59 13.5 Feb. 8,119 -0.2 1,532 22.0 1,372 1.1 52 -8.8 Mar. 8,227 3.1 1,681 10.7 1,513 3.1 67 -6.9 1st Q 4,844 4,369 178 Apr. 8,328 4.6 1,403 7.1 1,437 0.5 61 -10.3 May 8,233 5.9 1,673 23.1 1,667 8.1 57 -26.9 June 8,182 8.9 1,356 21.8 1,754 7.5 50 -39.0 2nd Q 4,432 4,858 168 July 7,734 11.9 1,404 -7.6 1,698 9.5 49 25.6 Aug. 7,391 8.0 1,653 -6.1 1,815 13.3 40 -21.6 Sept. 7,189 3.5 2,173 13.5 1,594 4.5 46 4.5 3rd Q 5,230 5,107 135 Oct. 7,722 5.9 2,278 1.5 1,529 1.7 51 8.5 Nov. 8,420 5.4 1,804 9.9 1,478 7.9 61 -1.6 Dec. 8,685 5.9 1,446 7.5 1,412 -1.4 52 -35.0 4th Q 5,528 4,419 164 Annua 20,034 18,753 645 1996 Jan. 8,667 7.9 1,312 -19.6 1,626 9.6 49 -16.9 Feb. 8,304 2.3 1,441 -5.9 1,541 12.3 52 Mar. 8,152 -0.9 1,666 -0.9 1,476 -2.4 56 -16.4 1st Q 4,419 4,643 157 Apr. 8,286 -0.5 1,150 -18.0 1,613 12.2 65 6.6 May 7,758 -5.8 1,300 -22.3 1,747 4.8 58 1.8 June 7,253 -11.4 1,068 -21.2 1,696 -3.3 47 -6.0 2nd Q 3,518 5,056 170 July 6,578 -14.9 1,483 5.6 1,678 -1.2 46 -6.1 Aug. 6,337 -14.3 1,965 18.9 1,653 -8.9 37 -7.5 Sept. 6,612 -8.0 2,267 4.3 1,342 -15.8 51 10.9 3rd Q 5,715 4,673 134 Oct. 7,486 -3.1 2,536 11.3 1,431 -6.4 57 11.8 Nov. 8,534 1.4 1,953 8.3 1,418 -4.1 66 8.2 Dec. 9,003 3.7 1,423 -1.6 1,415 0.2 68 30.8 4th Q 5,912 4,264 191 Annua 19,564 18,636 652 1997 Jan. 8,943 3.2 1,663 26.8 1,728 6.3 65 32.7 Feb. 8,813 6.1 1,552 7.7 1,554 0.8 42 -19.2 Mar. 8,769 7.6 1,694 1.7 1,497 1.4 62 10.7 1st Q 4,909 4,779 169 Apr. 8,904 7.5 1,296 12.7 1,648 2.2 68 4.6 May 8,484 9.4 1,612 24.0 1,785 2.2 80 37.9 June 8,231 13.5 1,224 14.6 1,732 2.1 44 -6.4 2nd Q 4,132 5,165 192 July 7,679 16.7 1,751 18.1 1,852 10.4 42 -8.7 Aug. 7,536 18.9 2,111 7.4 1,755 6.2 42 13.5 Sept. 7,850 18.7 2,278 0.5 1,528 13.9 42 -17.6 3rd Q 6,140 5,135 126 Oct. 8,558 14.3 2,454 -3.2 1,545 8.0 77 35.1 Nov. 9,390 10.0 1,826 -6.5 1,429 0.8 69 4.5 Dec. 9,718 7.9 1,304 -8.4 1,499 5.9 68 4th Q 5,584 4,473 214 1998 Jan. 9,455 5.7 1,492 -10.3 1,689 -2.3 78 20.0 Feb. 9,180 4.2 1,290 -16.9 1,579 1.6 56 33.3 Mar. 8,835 0.8 1,421 -16.1 1,580 5.5 69 11.3 1st Q 4,203 4,848 203 Apr. 8,607 -3.3 1,358 4.8 1,609 -2.4 61 -10.3 May 8,295 -2.2 1,740 7.9 1,681 -5.8 65 -18.8 June 8,289 0.7 1,314 7.4 1,314 -0.3 51 15.9 2nd Q 4,412 4,604 177 July 7,525 -2.0 1,677 -4.2 1,755 -5.2 41 -2.4 Aug. 7,706 2.3 Sept. ------------------------------------------------------------------ High Plains cattle feeding simulator Purchased During Apr-98 May-98 Jun-98 Jul-98 Marketed During Aug-98 Sep-98 Oct-98 Nov-98 Expenses: ($/head) 750 lb. feeder stee 572.70 565.13 557.70 546.75 Total feed, handling, and management cha 140.95 134.83 136.87 133.42 Interest on feeder and 1/2 feed 33.64 33.08 32.75 31.90 Death loss (1% of purchase) 5.73 5.65 5.58 5.47 Marketing 1/ f.o.b. f.o.b. f.o.b. f.o.b. Total expenses 753.02 738.69 732.89 717.54 Selling price required to cover: ($/cwt) Feed and feeder cos 61.47 60.29 60.04 58.75 All costs 64.86 63.62 63.35 61.98 Selling price 2/ Net margin -2.36 -0.12 1.15 3.52 Cost per 100 lb. gain: Variable cost less interest $/cw 35.69 34.18 35.00 34.07 Feed costs $/cwt 34.29 32.80 33.63 32.73 Total costs $/cwt 43.87 42.23 43.05 41.89 Prices: ($/cwt) Choice feeder steer 750-800 lb. Ok Cit 74.96 73.95 72.96 71.50 Feed, Prices, High Plains Milo $/cwt 4.02 3.83 3.84 3.66 Corn $/cwt 4.59 4.43 4.50 4.29 Wheat $/cwt 4.89 4.71 4.44 4.39 Cottonseed Meal (41%) $/cwt. 6.41 5.78 6.68 7.59 Alfalfa hay $/ton 153.00 149.00 148.00 148.00 Interest, annual rate 3/ 10.46 10.46 10.46 10.40 1/ Cattle sold f.o.b., 4% shrink. 2/ Steers, 1100-1300 lb, Tx-Okl direct. 3/ Variable interest rate, 11th District Federal Reserve. Historical data is available by autofax. Dial 202-694-5700 Document number 11520. ------------------------------------------------------------------------------ Total heifers entering cow herd January-June and July-December Jan 1 Intended Total 1/ July 1 Heifers Percent cow herd re- disap- cow in- entering enter- Year inven- placements pearance ventory the herd ing tory Jan 1 Jan-Jun Jan-Jun - - 1,000 head- - Percent 1986 44,869 9,874 4,340 45,000 4,471 45.3 1987 44,412 9,519 3,699 44,400 3,687 38.7 1988 43,494 9,371 3,468 43,900 3,874 41.3 1989 42,625 9,442 3,517 43,000 3,892 41.2 1990 42,469 9,454 3,347 42,900 3,778 40.0 1991 42,485 9,536 3,229 43,200 3,944 41.4 1992 42,735 9,774 3,271 43,600 4,136 42.3 1993 43,023 10,268 3,395 44,600 4,972 48.4 1994 44,178 10,509 3,294 45,100 4,216 40.1 1995 44,643 10,616 3,460 45,600 4,417 41.6 1996 44,644 10,283 3,911 45,000 4,267 41.5 1997 43,580 10,113 3,639 44,000 4,059 40.1 1998 42,874 9,727 3,359 43,300 3,785 38.9 Intended Total 2/ entering Heifers Percent herd re- disap- cow in- entering enter- Year placements pearance ventory the herd ing July 1 Jul-Dec following Jul-Dec year - - 1,000 head - Percent 1986 9,500 4,294 44,412 3,706 39 1987 9,400 3,577 43,494 2,671 28 1988 9,200 3,522 42,625 2,247 24 1989 9,200 3,438 42,469 2,907 32 1990 9,100 3,210 42,485 2,795 31 1991 9,300 3,031 42,735 2,566 28 1992 9,700 3,216 43,023 2,639 27 1993 9,700 3,336 44,178 2,914 30 1994 9,900 3,310 44,643 2,853 29 1995 9,600 3,490 44,644 2,534 26 1996 9,200 4,032 43,580 2,612 28 1997 8,900 3,578 42,874 2,452 28 1998 8,600 1/ Death loss calculated as 1 percent of January 1 cow inventory plus estimated cow slaughter. 2/ Death loss calculated as 1/2 percent of January 1 cow plus estimated commmercial cow slaughter ------------------------------------------------------------------------------ Beef heifers entering cow herd January-June and July-December Jan 1 Intended Total 1/ July 1 Heifers Percent cow herd re- disap- cow in- entering enter- Year inven- placements pearance ventory the herd ing tory Jan 1 Jan-Jun Jan-Jun - - 1,000 head- - Percent 1992 33,007 5,643 1,695 33,900 2,588 45.9 1993 33,365 6,092 1,767 34,900 3,302 54.2 1994 34,650 6,365 1,744 35,600 2,694 42.3 1995 35,156 6,475 1,907 36,100 2,851 44.0 1996 35,228 6,179 2,302 35,600 2,674 43.3 1997 34,271 6,056 2,072 34,700 2,501 41.3 1998 33,683 5,745 1,896 34,100 2,313 40 1/ Death loss calculated as 1 percent of January 1 cow inventory plus estimated cow slaughter. 2/ Death loss calculated as 1/2 percent of January 1 cow plus estimated commmercial cow slaughter. Jan 1 Heifers Intended Total 2/ entering entering Percent herd re- disap- cow in- the herd enter- Year placements pearance ventory Jul-Dec ing July 1 Jul-Dec following year - - 1,000 head - Percent 1992 5,600 1,681 33,365 1,146 20.5 1993 5,700 1,759 34,650 1,509 26.5 1994 5,900 1,797 35,156 1,353 22.9 1995 5,700 1,976 35,228 1,104 19.4 1996 5,500 2,391 34,271 1,062 19.3 1997 2,015 33,683 998 18.8 1998 1/ Death loss calculated as 1 percent of January 1 cow inventory plus estimated cow slaughter. 2/ Death loss calculated as 1/2 percent of January 1 cow plus estimated commmercial cow slaughter. ----------------------------------------------------------------------------- July 1 cattle inventory Class 1990 1991 1992 1993 1994 1,000 head Cattle and calves 104,600 106,100 107,200 109,000 111,300 Cows and heifers that have calved 42,900 43,200 43,600 44,600 45,100 Beef cows 32,900 33,400 33,900 34,900 35,600 Milk cows 10,100 10,000 9,700 9,700 9,500 Heifers 500 lb+ 16,000 16,500 16,700 17,000 17,400 For beef cow replacement 5,000 5,200 5,600 5,700 5,900 For milk cow replacement 4,100 4,100 4,100 4,000 4,000 Other heifers 6,900 7,200 7,000 7,300 7,500 Steers 500 lb+ 14,100 14,600 14,800 14,900 15,200 Bulls 500 lb+ 2,200 2,200 2,200 2,200 2,300 Calves under 500 lbs 29,400 29,600 29,900 30,300 31,300 Calf crop: Jan-June 28,404 28,430 28,150 28,285 28,689 July-Dec 10,413 10,183 10,433 10,648 10,759 Class 1995 1996 1997 1998 Cattle and calves 113,000 111,500 109,000 107,000 Cows and heifers that have calved 45,600 45,000 44,000 43,300 Beef cows 36,100 35,600 34,700 34,100 Milk cows 9,500 9,400 9,300 9,200 Heifers 500 lb+ 17,600 17,300 17,100 16,700 For beef cow replacement 5,700 5,500 5,300 5,000 For milk cow replacement 3,900 3,700 3,600 3,600 Other heifers 8,000 8,100 8,200 8,100 Steers 500 lb+ 15,400 15,100 14,800 14,500 Bulls 500 lb+ 2,400 2,400 2,300 2,200 Calves under 500 lbs 32,000 31,700 30,800 30,300 Calf crop: Jan-June 29,348 29,835 29,558 28,718 July-Dec. 10,711 10,376 10,218 10,000 ------------------------------------------------------------------------------ Per capita consumption of selected cheese varieties, 1970-97 Italian Provolone Romano Parmesan Mozzarella Ricotta Other Total Pounds 1970 0.23 0.15 0.17 1.19 0.24 0.08 2.06 1971 0.22 0.14 0.20 1.38 0.28 0.07 2.30 1972 0.24 0.17 0.23 1.58 0.31 0.08 2.61 1973 0.27 0.15 0.18 1.77 0.34 0.09 2.81 1974 0.27 0.15 0.25 1.86 0.33 0.09 2.96 1975 0.28 0.22 0.17 2.12 0.38 0.07 3.24 1976 0.31 0.17 0.27 2.32 0.41 0.08 3.56 1977 0.35 0.16 0.26 2.47 0.41 0.09 3.73 1978 0.36 0.19 0.28 2.69 0.44 0.11 4.07 1979 0.40 0.16 0.32 2.81 0.46 0.08 4.24 1980 0.42 0.15 0.28 3.02 0.47 0.10 4.44 1981 0.45 0.14 0.30 2.98 0.49 0.09 4.45 1982 0.47 0.17 0.32 3.29 0.47 0.11 4.84 1983 0.50 0.16 0.32 3.68 0.54 0.09 5.29 1984 0.54 0.17 0.35 4.03 0.58 0.09 5.77 1985 0.57 0.21 0.38 4.63 0.60 0.08 6.46 1986 0.57 0.16 0.33 5.19 0.63 0.10 6.99 1987 0.61 0.23 0.42 5.62 0.68 0.08 7.63 1988 0.61 0.19 0.49 6.01 0.73 0.11 8.13 1989 0.61 0.20 0.42 6.44 0.75 0.08 8.50 1990 0.63 0.14 0.43 6.93 0.79 0.06 8.98 1991 0.62 0.17 0.46 7.22 0.84 0.06 9.37 1992 0.65 0.14 0.53 7.71 0.88 0.05 9.97 1993 0.68 0.13 0.50 7.55 0.88 0.08 9.82 1994 0.71 0.15 0.45 7.94 0.91 0.13 10.29 1995 0.70 0.16 0.39 8.08 0.91 0.16 10.41 1996 3/ 0.78 0.16 0.29 8.48 0.95 0.13 10.79 1997 3/ 0.75 0.18 0.62 8.38 0.89 0.15 10.96 American Miscellaneous Cheddar Other 1/ Total Swiss 2/ Brick Pounds 1970 5.79 1.22 7.02 0.89 0.10 1971 5.94 1.42 7.35 0.94 0.11 1972 6.04 1.67 7.71 1.07 0.10 1973 6.10 1.76 7.86 1.07 0.11 1974 6.32 2.16 8.48 1.20 0.11 1975 6.04 2.13 8.17 1.10 0.09 1976 6.45 2.46 8.91 1.25 0.09 1977 6.80 2.43 9.23 1.21 0.07 1978 6.94 2.61 9.55 1.34 0.08 1979 6.93 2.69 9.62 1.36 0.06 1980 6.89 2.76 9.64 1.33 0.07 1981 7.03 3.14 10.18 1.27 0.06 1982 8.72 2.61 11.34 1.30 0.06 1983 9.11 2.52 11.63 1.25 0.06 1984 9.53 2.32 11.85 1.24 0.07 1985 9.76 2.42 12.19 1.29 0.08 1986 9.76 2.36 12.12 1.29 0.08 1987 10.61 1.80 12.41 1.24 0.12 1988 9.52 1.98 11.50 1.29 0.10 1989 9.17 1.86 11.03 1.24 0.07 1990 9.04 2.09 11.13 1.35 0.07 1991 9.05 2.02 11.07 1.22 0.06 1992 9.20 2.13 11.32 1.19 0.06 1993 9.13 2.28 11.41 1.20 0.05 1994 9.11 2.44 11.55 1.16 0.05 1995 9.09 2.74 11.84 1.13 0.04 1996 3/ 9.18 2.81 11.99 1.10 0.04 1997 3/ 9.60 2.43 12.03 1.02 0.03 Miscellaneous--continued Munster Cream and Blue Other Total All Neufchatel 4/ cheese Pounds 1970 0.17 0.61 0.15 0.37 2.29 11.37 1971 0.19 0.62 0.15 0.37 2.38 12.03 1972 0.22 0.63 0.17 0.49 2.68 13.00 1973 0.22 0.66 0.18 0.60 2.83 13.49 1974 0.23 0.71 0.16 0.57 2.97 14.41 1975 0.24 0.74 0.16 0.53 2.86 14.27 1976 0.25 0.77 0.18 0.50 3.05 15.52 1977 0.25 0.80 0.18 0.51 3.03 15.99 1978 0.27 0.89 0.19 0.43 3.19 16.84 1979 0.28 0.94 0.18 0.48 3.30 17.16 1980 0.31 1.00 0.17 0.57 3.44 17.53 1981 0.29 1.05 0.16 0.71 3.54 18.18 1982 0.31 1.13 0.16 0.77 3.73 19.90 1983 0.30 1.15 0.16 0.73 3.66 20.57 1984 0.32 1.17 0.17 0.88 3.85 21.48 1985 0.34 1.23 0.17 0.78 3.90 22.54 1986 0.37 1.33 0.17 0.76 4.00 23.12 1987 0.38 1.41 0.17 0.73 4.05 24.10 1988 0.34 1.53 0.17 0.65 4.08 23.71 1989 0.37 1.62 0.16 0.82 4.27 23.79 1990 0.40 1.72 0.17 0.80 4.51 24.63 1991 0.42 1.77 0.16 0.95 4.58 25.02 1992 0.45 2.02 0.15 0.84 4.72 26.00 1993 0.45 2.09 0.15 1.07 5.01 26.25 1994 0.44 2.20 0.17 1.00 5.00 26.84 1995 0.41 2.07 0.17 1.22 5.03 27.27 1996 3/ 0.40 2.17 0.17 1.08 4.96 27.74 1997 3/ 0.37 2.30 0.19 1.17 5.08 28.07 Processed products Consumed Cheese Foods and Total Cheese as natural spreads processed content cheese Pounds 1970 3.33 2.20 5.53 4.42 6.94 1971 3.55 2.31 5.86 4.70 7.33 1972 3.38 2.62 6.01 4.75 8.25 1973 3.31 2.68 5.99 4.72 8.77 1974 3.42 2.92 6.34 4.98 9.43 1975 3.35 3.34 6.69 5.19 9.09 1976 3.89 2.59 6.48 5.19 10.33 1977 3.88 3.23 7.12 5.60 10.39 1978 3.84 3.23 7.07 5.58 11.26 1979 3.83 3.12 6.94 5.47 11.69 1980 3.96 3.09 7.05 5.57 11.96 1981 3.63 3.14 6.77 5.31 12.86 1982 4.66 3.29 7.95 6.33 13.57 1983 5.09 3.32 8.41 6.74 13.82 1984 4.46 3.30 7.76 6.16 15.32 1985 4.60 3.00 7.60 6.09 16.46 1986 4.77 3.18 7.96 6.37 16.75 1987 5.23 3.18 8.41 6.82 17.28 1988 4.60 3.75 8.34 6.58 17.13 1989 4.61 3.57 8.17 6.41 17.38 1990 4.79 3.84 8.63 6.81 17.82 1991 4.89 3.77 8.66 6.85 18.17 1992 5.23 3.35 8.58 6.88 19.13 1993 5.23 3.47 8.71 6.97 19.28 1994 5.33 3.48 8.82 7.06 19.78 1995 5.52 3.30 8.82 7.11 20.17 1996 3/ 5.53 3.37 8.90 7.15 20.59 1997 3/ 5.24 3.02 8.26 6.68 21.40 1/ Includes Colby, washed curd, stirred curd, Monterey, and Jack. 2/Includes imported Emmenthaler and Gruyere. 3/ Preliminary. 4/ Includes Gorgonzola. Numbers may not add due to rounding. ---------------------------------------------------------------------- PRODUCTION INDICATORS 1997 1998 1998 Jul. May Jun. Jul. /* 1000 Head Cattle: On feed - 7 States, 1,000+ Hd. 7,679 8,295 8,289 7,525 Net placements 1,709 1,675 1,263 1,677 Marketings 1,852 1,681 1,727 1,755 Broilers: Eggs in incubators (000)/1 590,137 612,632 617,122 609,342 Chicks hatched (000) /2 710,699 739,952 718,983 725,000 Hatching egg layers /1 52,517 55,442 54,920 54,297 Pullets placed (000) 7,167 7,062 6,896 NA Hvy-type hen slaughter 5,382 5,902 5,838 5,600 Turkeys: Eggs in incubators (000)/1 38,586 33,296 33,779 34,116 Poults placed (000)/1 0,092 25,677 27,047 27,200 Eggs: Table egg prod. (mil. doz.)/2 451.6 463 450.3 465 Table egg layers, (000)/1 243,916 250,629 250,442 250,748 Table eggs/100 layers/1 71.5 71.9 71.2 72.6 Chicks hatched (000)/2 33,838 39,602 39,206 35,500 Lt.-type hen slaughter/2 8,784 8,811 8,626 9,000 ESTIMATED RETURNS 1997 1998 1998 Aug. Jun. Jul. Aug. /* Cents/lb. Great Plains cattle feedlot Breakeven price /3 65.87 64.28 62.87 64.86 Selling price 65.19 63.85 60.28 60 Net margin -0.68 -0.43 -2.59 -4.86 N. Central hog farrow to finish Breakeven price /3 47.12 41.91 41.25 41.31 Selling price 54.7 41.57 35.91 35.25 Net margin 7.58 -0.34 -5.34 -6.06 Broiler Wholesale cost 53.45 48.55 48.37 48.47 Wholesale price 63.25 64.26 68.53 71.00 Net margin 9.80 15.71 20.16 22.53 Turkey Wholesale cost 71.18 62.53 60.94 60.64 Wholesale price 65.73 59.38 62.24 64.00 Net margin -5.45 -3.15 1.30 3.36 Egg Wholesale cost 71.07 66.05 66.03 65.77 Wholesale price 77.32 72.27 72.46 78.00 Net margin 6.25 6.22 6.43 12.23 /1 First of month /2 Last month estimated /3 Does not include capital replacement cost /* estimate --------------------------------------------------------------------------- LIVESTOCK PRICES Aug-97 Jun-98 Jul-98 Aug-98 /* Cattle prices $/cwt. Steers, Choice, 11-13 cwt. Texas Panhandle 65.19 63.85 60.28 60.00 Nebraska Direct 65.96 63.26 59.97 60.00 Cows - Sioux Falls Utility breaking 36.31 42.19 40.69 40.00 Utility boning 35.44 39.61 36.11 35.25 Feeder Cattle - Oklahoma City Steers: Med. #1 500-550 lb. 92.86 81.23 75.64 76.25 600-650 lb. 85.00 77.40 72.96 73.00 750-800 lb. 80.53 73.10 69.13 68.75 Heifers: Med. #1 450-500 lb. 83.09 77.79 71.30 71.00 700-750 lb. 77.63 69.13 66.20 65.75 Hog prices Barrows and gilts 6 Markets 54.06 41.40 36.07 35.50 Iowa/S. Minn No. 1-3 54.70 41.57 35.91 35.25 Sows 6 Markets 46.06 30.54 26.77 24.25 Sheep & lamb prices San Angelo TX Slaughter lambs, Choice 90.25 91.21 82.21 81.25 Ewes, Good 51.38 37.88 36.21 NA Feeder lambs, Choice 100.94 88.00 76.43 76.50 GRAIN AND FEED PRICES Aug-97 Jun-98 Jul-98 Aug-98 /* $/bu Corn, #2 Yellow, Cen. Ill 2.60 2.29 2.16 2.22 Wheat, HRW Ord., K.C. 3.77 3.05 2.87 2.93 SBM, 48% Solvent, Decatur 273.32 168.55 183.45 179.00 Alfalfa Hay, U.S. Avg 106.00 96.50 93.40 NA Grass Hay, U.S. Avg 74.70 74.10 72.70 NA /* Estimates -------------------------------------------------------------------------- WHOLESALE PRICES Aug-97 May-98 Jun-98 Jul-98 Aug-98 /* Beef, Central U.S. $/cwt Boxed beef cutout Choice 1-3 550-700 lb. 105.14 102.09 100.38 99.96 104.20 Choice 1-3 700-850 lb. 104.49 101.49 99.58 98.46 102.65 Select 1-3 700-850 lb. 96.39 92.24 94.71 90.41 91.00 Canner-Cutter Cows 68.46 66.58 63.50 62.83 62.75 Bnls beef, 90% fresh 91.07 93.64 90.25 89.75 86.50 Importd bnls. beef 90% frz. 90.69 87.03 83.78 83.98 82.00 Hide & offal value 8.27 7.45 7.17 6.79 7.00 Veal carcass, 220-280 lb. 178.32 165.08 161.38 157.15 163.00 Pork, Central U.S. Pork cutout composite 76.45 63.94 62.45 57.10 58.25 Loins, 14-19 lb. BI 1/4" t 119.28 130.64 113.13 106.51 109.00 Bellies, 12-14 lb. skin on 85.43 57.87 63.10 68.46 79.00 Hams, 20-27 lb. BI trmd. T 64.68 46.62 50.80 44.75 48.25 Trimmings, 72% fresh 68.29 30.83 38.76 32.85 28.50 Lamb, East Coast 55 lb. Down, Choice 181.63 141.98 189.03 161.68 162.00 55-65 lb., Choice 180.88 140.15 190.28 166.68 167.50 cents/lb. Broilers 12 City Avg. 63.25 60.08 64.26 68.53 71.00 Georgia dock 62.17 57.72 61.07 65.96 69.00 Northeast Breast, boneless 194.77 183.62 197.22 212.83 225.00 Breast, Ribs on 97.53 91.85 96.90 105.18 112.00 Legs, whole 48.29 43.67 45.09 48.25 52.00 Leg quarters 30.79 27.50 29.50 33.98 36.00 Turkeys Eastern Region Toms, 14-22 lb. 64.95 57.42 57.42 57.23 59.23 Hens, 8-16 lb. 68.20 58.14 58.14 58.68 60.57 Breast, 4-8 lb. 92.00 91.40 91.40 92.00 92.00 Drumsticks 25.64 30.70 30.70 25.71 29.18 Wings, full cut 33.47 28.76 28.76 28.14 30.05 Eggs, grd A, lg, doz !2 City Metro 77.32 76.85 76.85 62.12 72.27 New York 74.69 71.59 71.59 60.45 67.32 /* Estimates ------------------------------------------------------------------------------ MEAT STATISTICS Jan. - Jan. - Aug. '97 Aug. '98 Apr May June July Aug./* Commercial production Million pounds Beef 17000 17201 2090 2124 2249 2230 2293 Veal 218 167 20 19 20 21 19 Pork 10988 12152 1566 1420 1444 1530 1505 Lamb 171 164 25 19 19 17 16 Total red meat 28377 29684 3701 3582 3732 3798 3833 Broilers 18156 18440 2384 2247 2329 2335 2300 Other chicken 344 351 48 46 46 47 40 Turkeys 3588 3486 442 421 457 450 425 Total poultry 22087 22277 2874 2714 2832 2832 2765 Total meat & poultry 50464 51961 6575 6296 6564 6630 6598 Jan. - Jan. - 1998 Aug. '97 Aug. '98 Apr May June July Aug./* Commercial slaughter/** Thousand head Cattle 24488 23869 2928 2958 3109 3060 3133 Steers 12049 11836 1422 1486 1599 1565 1591 Heifers 7747 7702 971 962 967 952 984 Beef Cows 2285 2119 257 259 284 285 273 Dairy Cows 1939 1784 227 198 204 205 209 Bulls and stags 468 418 51 53 55 53 66 Calves 1028 955 109 102 116 136 123 Sheep 2592 2508 384 281 294 280 265 Hogs 58800 64828 8329 7572 7730 8270 8150 Barrows & gilts 56548 62197 7998 7269 7391 7909 7790 Sows 1846 2275 287 266 293 313 310 Broilers 5172381 5224929 659824 631973 662556 68000 665000 Turkeys 189313 178186 22527 21288 23303 24000 22000 1998 Aug. '97 Apr May June July Aug./* F.I. dressed weight Pounds Cattle 701 720 724 730 734 737 Calves 215 182 186 173 159 158 Sheep 67 67 70 67 64 63 Hogs 188 189 188 188 185 185 Beginning cold storage stocks Million pounds Beef 303 330 335 310 314 NA Pork 389 459 487 477 431 NA Bellies 34 54 59 59 52 NA Hams 113 79 80 92 91 NA Total chicken 666 676 689 664 580 NA Turkey 714 527 580 613 654 NA Frozen eggs 9 10 9 13 10 NA /* Estimates with exception of Cold Storage /** Slaughter classes are estimated ------------------------------------------------------------------------------ RETAIL PRICES & SPREADS Jul-97 Mar-98 Apr-98 May-98 Jun-98 Jul-98 Retail prices Cents/lb. Beef - Choice 279.2 273.1 278.2 277.4 278.7 278.5 Beef - All Fresh 251.1 256.3 255.4 254.5 251.2 250.9 Ground Beef 140.2 141.3 141.9 141.1 138.8 144.7 Rib roast 276.4 272.6 275.1 275.6 265.2 271.9 T-bone steak 593.4 585.1 607.5 624.3 626.1 597.9 Pork 232.7 229.8 225.0 226.7 228.9 231.0 Bacon 271.8 253.9 244.4 243.8 245.7 251.7 Chops 350.2 315.1 324.3 326.0 329.4 331.1 Picnic 216.2 232.6 228.0 232.2 236.4 236.2 Chicken - Composite 153.4 150.3 151.7 151.5 155.1 152.7 Whole, fresh 100.5 103.2 102.9 103.2 101.6 103.3 Breast - bone in 207.3 198.8 201.7 200.7 208.1 204.8 Leg quarter 125.5 124.9 125.6 126.0 127.9 125.2 Turkey; whole frozen 107.4 99.6 97.2 95.7 99.1 100.8 Eggs, Grade A, Large 97.9 104.3 106.1 96.0 93.2 97.1 Price indexes 1982-84=100 CPI - All 160.5 162.2 162.5 162.8 163.0 163.2 All food 157.0 159.7 159.8 160.3 160.1 160.5 All meat 144.6 142.2 140.8 141.0 141.5 141.8 Beef & veal 136.5 136.8 136.5 136.3 136.3 136.1 Pork 157.5 149.5 145.9 147.6 148.7 149.7 Poultry 157.9 155.1 154.3 155.6 155.5 156.6 Price Spreads Cents / retail lb. Beef Farm to wholesale 22.4 17.1 15.2 19.9 19.7 25.4 Wholesale to retail 122.1 126.1 126.6 120.4 124.2 124.5 Farmers share (%) 48.0 48.0 49.0 49.0 48.0 46.0 Pork Farm to wholesale 30.1 37.1 35.3 33.5 32.2 37.3 Wholesale to retail 109.3 138.4 134.0 126.9 130.9 136.1 Farmers share (%) 40.0 24.0 25.0 29.0 29.0 25.0 Poultry and eggs Wholesale to retail Broilers 84.5 88.9 93.3 89.4 89.9 79.1 Retail to consumer Turkey 32.0 35.2 31.2 29.4 30.7 29.6 Eggs 14.8 20.2 30.3 34.9 21.9 25.6 ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ U.S. LIVESTOCK & MEAT IMPORTS & EXPORTS Jul-97 Aug-97 Sep-97 Oct-97 Nov-97 Dec-97 Jan-98 Beef & Veal Imports Carcass wt.,thousand lb. Australia 56069 70247 63361 44285 52782 34175 62724 New Zealand 59673 44385 27339 22765 21041 35241 53449 Canada 44449 54741 59755 65991 67072 66223 74167 Brazil 8878 7425 6621 7042 6518 8845 11652 Argentina 12614 11558 8382 11253 12501 21031 12767 Central America 4031 8364 11650 7480 6994 7863 3886 Other 6793 4211 5090 3184 4692 8362 4407 Total 192509 200930 182197 161999 171600 181739 223052 Beef & Veal Exports Japan 91224 93797 94633 90304 99523 79340 84595 Canada 37274 27703 21781 22569 23627 23095 19649 Mexico 28905 29393 30499 34068 28555 35481 25837 Korea, Rep. 26064 28472 25413 25716 26133 11628 6561 Caribbean 1072 811 790 1476 1710 712 1881 Other 16643 22301 23201 19564 22071 22347 15320 Total 201182 202476 196318 193697 201619 172604 153843 Cattle Imports Head Mexico 20543 23149 26681 72261 145208 87689 58093 Canada 108286 99663 145505 141029 101258 80269 93987 Over 700 lbs 103471 91782 126593 119850 83585 71504 84809 440-700 lbs. 1744 3635 9197 11433 9001 3994 4949 Total 128829 122823 172186 213401 246466 167958 152080 Cattle Exports Mexico 22479 25874 22130 26853 17522 19985 18132 Canada 3296 3224 3244 3290 3698 6707 4678 Total 25937 29330 25828 31053 21745 27081 23425 Lamb Imports Carcass wt.,thousand lb. Australia 2288 1860 2075 2484 2468 3566 2975 New Zealand 1711 1899 1536 2017 1339 2106 2494 Total 4074 3784 3670 4609 4010 5710 5513 Mutton Imports Total 1470 1293 1080 1528 1207 2142 3874 Lamb and mutton exports Total 457 545 489 240 478 580 634 Pork Imports Canada 35982 37201 39660 41479 37544 38163 35080 Denmark 8689 9021 9764 8814 9606 10144 8346 Poland 1388 740 1050 1665 1243 2192 1217 Hungary 616 805 543 873 265 783 536 Netherlands 790 84 977 930 504 1021 948 Other 3933 2281 3288 4386 3395 4614 3372 Total 51397 50131 55281 58146 52557 56917 49500 Pork Exports Japan 42907 44292 36101 41170 44315 35554 36382 Canada 9754 9020 10070 11066 13017 11450 12790 Mexico 7855 7149 8255 9320 7848 10403 10532 Caribbean 716 925 1107 1323 1284 1383 1029 Other 28164 32546 33201 47527 34809 33323 26526 Total 89396 93932 88735 110406 101272 92113 87258 Hog Imports Carcass wt.,thousa Canada 261223 227802 248186 287815 282203 361135 381649 Under 110 lb 89110 71152 87849 93076 74177 79412 87548 Total 261683 227802 248186 287903 282203 361197 381743 Hog Exports Total 3170 1777 3313 9968 4451 4322 15487 Broiler Exports RTC, thousand lb. Japan 16686 19241 15583 21865 21336 12591 23089 Mexico 20345 21800 21638 23932 18952 24134 19774 Hong Kong 84392 74098 74611 82389 70991 77908 25916 Singapore 2362 3185 3685 3478 2189 2886 1996 Canada 11509 11782 11031 10355 11375 8106 10517 Russia 157129 176317 158756 194816 180994 176248 234851 Total 398646 432935 391484 449590 402079 401604 440624 Turkey Exports Mexico 12671 16459 17376 17697 20706 24477 11710 S. Korea 2845 2423 2668 3325 1255 100 168 Russia 9881 4080 6466 8981 4408 6975 3616 Hong Kong 11058 11249 14818 9683 9143 12173 3343 Total 48067 48927 64878 53766 48899 57134 29717 Shell Thousand dz. Egg Exports 6959 7780 9459 11495 8896 8657 6370 U.S. LIVESTOCK & MEAT IMPORTS & EXPORTS Feb-98 Mar-98 Apr-98 May-98 Jun-98 Beef & Veal Imports Australia 36249 62706 69689 42643 93003 New Zealand 69972 66652 57856 63443 81090 Canada 64503 62376 56803 67461 72077 Brazil 6648 10504 10262 10230 11589 Argentina 8606 8451 7337 6612 9670 Central America 8037 7456 3022 2668 2640 Other 3878 4978 3946 4906 5692 Total 197893 223124 208914 197962 275762 Beef & Veal Exports Japan 87664 97216 99949 95319 98857 Canada 19991 21390 22138 21095 23098 Mexico 30535 30814 28941 31582 33203 Korea, Rep. 6211 15617 8231 11237 6607 Caribbean 1596 1926 1730 1550 1360 Other 13835 19811 15029 23641 12990 Total 159832 186774 176017 184424 176114 Cattle Imports Mexico 62163 81158 77627 59814 22877 Canada 114883 127660 128398 114013 100818 Over 700 lbs 102578 115540 110465 96810 92910 440-700 lbs. 7355 4961 8743 9825 1150 Total 177046 208892 206025 173827 123695 Cattle Exports Mexico 16294 15793 13244 11248 13424 Canada 5913 7544 6606 8831 6882 Total 22525 23874 21225 21601 20633 Lamb Imports Australia 2856 4733 3172 2556 2285 New Zealand 2918 4539 3284 2705 3367 Total 5839 9319 6466 5349 5682 Mutton Imports Total 2987 4676 4347 3088 3354 Lamb and mutton exports Total 324 571 579 327 258 Pork Imports Canada 32089 35345 36381 32382 38526 Denmark 12829 10735 9322 6677 11889 Poland 1651 2027 802 1673 1580 Hungary 422 687 661 820 1014 Netherlands 1216 826 870 769 476 Other 3352 3671 3413 3589 2508 Total 51558 53290 51449 45910 55993 Pork Exports Japan 33896 39214 57660 43568 40552 Canada 12191 11505 9575 13869 11977 Mexico 9070 11265 11243 10962 12426 Caribbean 987 827 1244 1635 1421 Other 37228 52511 44379 45719 42247 Total 93371 115321 124100 115753 108623 Hog Imports Canada 321504 352390 302501 333389 361780 Under 110 lb 91993 122449 121504 99067 124344 Total 321510 352398 302597 333389 361792 Hog Exports Total 8423 6585 9767 9129 11388 Broiler Exports Japan 18736 16461 19765 18542 19583 Mexico 22760 26027 21548 24148 20705 Hong Kong 56673 82046 91456 84836 82472 Singapore 1265 1665 1896 792 975 Canada 8963 10716 10707 10488 9987 Russia 164709 132831 142743 186887 180613 Total 407423 392963 397049 474640 470756 Turkey Exports Mexico 15263 15309 13645 19389 25884 S. Korea 145 47 291 132 48 Russia 6186 9874 8144 13095 9688 Hong Kong 2547 2167 4159 2460 2862 Total 31181 34558 31296 41637 46284 Shell Egg Exports 7139 9189 9328 7757 8247 U.S. LIVESTOCK & MEAT IMPORTS & EXPORTS Annual Totals Jan - Jan - 1996 1997 Jun '97 Jun '98 Beef & Veal Imports Carcass wt.,thousand lb. Australia 544,996 639,420 318,501 367,015 New Zealand 503,657 576,044 365,600 392,463 Canada 585,751 711,454 353,223 397,387 Brazil 86,901 94,766 49,437 60,885 Argentina 153,398 146,657 69,319 53,442 Central America 111,107 93,254 46,872 27,709 Other 86,363 81,344 49,012 27,808 Total 2,072,173 2,342,939 1,251,963 1,326,708 Beef & Veal Exports Japan 1,015,778 1,053,553 504,731 563,599 Canada 295,424 282,725 126,675 127,361 Mexico 172,246 312,583 125,683 180,911 Korea, Rep. 203,796 261,673 118,247 54,464 Caribbean 12,924 12,979 6,409 10,043 Other 178,046 212,165 86,038 100,626 Total 1,878,214 2,135,677 967,781 1,037,004 Cattle Imports Head Mexico 456,246 669,409 293,878 361,732 Canada 1,509,136 1,376,814 700,804 679,759 Over 700 lbs 1,374,583 1,200,642 603,857 603,112 500-700 lbs. 74,293 107,650 68,646 36,983 Total 1,965,448 2,046,352 994,689 1,041,565 Cattle Exports Mexico 115,249 235,121 100,278 88,135 Canada 40,722 41,189 17,730 40,454 Total 174,307 282,344 121,370 133,283 Lamb Imports Carcass wt., thousand lb. Australia 26,423 32,968 18,228 18,577 New Zealand 23,970 26,417 15,808 19,307 Total 50,701 60,428 34,571 38,169 Mutton Imports 21,751 22,607 13,887 22,326 -------------------------------------------------------------------- Customs Service Product wt., metric tons YTD imports under WTO - 8/24/97 8/17/98 % of Quota Canada 163,402 182,763 NA TRQ Countries 315,038 326,477 47 Australia 134,061 149,496 40 New Zealand 148,220 154,173 72 Argentina NA 4,045 20 Uruguay 13,891 7,758 39 -------------------------------------------------------------------- May-98 Jun-98 Jan - Jan - Jun-97 Jun-98 Pork Imports Carcass wt., thousand lb. Canada 437,397 434,228 204,199 209,803 Denmark 122,211 123,839 67,803 59,798 Poland 10,525 15,002 6,724 8,951 Hungary 8,761 8,702 4,818 4,140 Netherlands 8,479 8,118 3,812 5,104 Other 31,511 42,206 20,310 19,904 Total 618,884 632,095 307,666 307,700 Pork Exports Japan 500,518 461,946 217,607 251,269 Canada 94,374 125,325 60,948 71,908 Mexico 69,820 86,988 36,157 65,497 Caribbean 11,934 12,200 5,463 7,143 Other 293,259 357,154 147,584 248,609 Total 969,905 1,043,613 467,759 644,426 Hog Imports Head Canada 2,778,741 3,178,260 1,509,896 2,053,213 Under 110 lb 2,779,175 987,359 492,583 646,905 Total 2,779,175 3,179,578 1,510,604 2,053,429 Hog Exports Total 55,883 54,647 27,646 60,779 Broiler Exports RTC, thousand lb. Japan 243,015 202,925 95,622 116,176 Mexico 218,203 248,332 117,531 134,962 Hong Kong 962,882 874,883 410,494 423,400 Singapore 49,655 34,845 17,060 8,588 Canada 74,813 119,397 55,238 61,378 Russia 1,881,273 1,912,427 868,167 1,042,633 Total 4,420,144 4,664,204 2,187,866 2,583,454 Turkey Exports Mexico 167,694 196,678 87,293 101,200 Russia 132,040 80,308 39,517 50,602 S. Korea 22,665 24,722 12,105 831 Hong Kong 25,487 125,625 57,501 17,538 Total 437,793 598,427 276,757 214,674 Shell thousand dz. Egg Exports 113,837 99,544 46,297 48,029 ------------------------------------------------------------------------ U.S. dairy situation at a glance 1995 1996 1997 Milk production: Production (Mil. lb., 20 States) 131,780 131,343 133,861 Milk cow (Thou., 20 States) 7,862 7,818 7,759 Milk per cow (Lb., 20 States) 16,762 16,847 17,254 Production (Mil. lb., U.S. est.) 155,424 154,259 156,603 Milk prices (Dol/cwt): All milk 12.74 14.88 13.34 Milk eligible for fluid use 12.78 14.95 13.38 Manufacturing grade milk 11.78 13.38 12.18 Basic Formula Price (3.5% fat) 11.83 13.39 12.05 Slaughter Cow, WI (Dol/cwt): 38.11 33.00 36.93 Wholesale prices (Cts/lb): Butter, Central States 1/ 75.59 100.35 107.06 American cheese, WI assembly pt. 40-pound blocks 132.77 149.14 132.40 Barrels 127.33 141.72 125.23 Nonfat dry milk, Central States 108.58 122.16 110.01 Retail prices (1982-1984=100): Consumer Price Index 152.4 156.9 160.5 All food 148.4 153.3 157.3 Dairy products 132.8 142.1 145.5 Fluid milk and cream 132.3 142.4 144.9 Manufactured products 134.0 142.4 146.8 Dairy product output (Mil. lb): Butter 1,264.5 1,174.5 1,151.3 American cheese 3,131.4 3,280.8 3,285.2 Other-than-American cheese 3,785.5 3,936.7 4,043.8 Frozen products (Mil. gal) 2/ 1,229.6 1,240.9 1,281.4 All products (milkfat basis 3/) 95,633 95,013 96,218 Nonfat dry milk 1,233.0 1,061.8 1,217.6 Beginning stocks (Mil. lb): Commercial butter 12.2 15.8 13.4 Commercial American cheese 309.5 306.6 379.6 Other cheese 126.8 105.3 107.3 Manufacturers' nonfat dry milk 103.5 70.6 71.1 All commercial (milkfat basis) 4,263 4,099 4,704 All commercial (skim solids basis 5,712 5,037 5,753 All Government (milkfat basis) 1,497 69 10 All Government (skim solids basis 341 172 7 Commercial disappearance (Mil. lb): Butter 1,186 1,180 1,108 American cheese 3,149 3,230 3,269 Other-than-American cheese 4,126 4,243 4,366 Nonfat dry milk 923 1,009 895 All products (milkfat basis 3/) 154,835 154,990 156,629 USDA net removals (Mil. lb): Butter 78.5 0.1 39.2 Cheese 6.1 4.6 11.3 Nonfat dry milk 343.8 57.2 296.7 All products (milkfat basis 3/) 2,106 87 1,109 All products (skim solids basis 3 4,374 747 3,666 Imports (Mil. lb, milkfat basis 3/) 2,936 2,911 2,698 International market prices (Dol/mt): Butter 2,251 1,837 1,861 Nonfat dry milk 2,143 1,979 1,738 1/ Grade AA Chicago before June 1998. 2/ Hard ice cream, ice milk, and sherbert. 3/ Milk equivalent. NA = Not Available. U.S. dairy situation at a glance May-97 Jun-97 Jul-97 Aug-97 Milk production: Production (Mil. lb., 20 States) 11,869 11,419 11,437 11,213 Milk cow (Thou., 20 States) 7,765 7,765 7,765 7,757 Milk per cow (Lb., 20 States) 1,529 1,471 1,473 1,446 Production (Mil. lb., U.S. est.) 13,902 13,370 13,324 13,058 Milk prices (Dol/cwt): All milk 12.70 12.20 12.10 12.70 Milk eligible for fluid use 12.80 12.30 12.20 12.80 Manufacturing grade milk 10.90 10.80 10.80 11.90 Basic Formula Price (3.5% fat) 10.70 10.74 10.86 12.07 Slaughter Cow, WI (Dol/cwt): 40.50 38.50 40.35 37.00 Wholesale prices (Cts/lb): Butter, Central States 1/ 86.1 105.5 102.7 102.5 American cheese, WI assembly pt. 40-pound blocks 116.5 117.9 123.3 137.6 Barrels 114.3 112.6 113.3 129.4 Nonfat dry milk, Central States 109.8 107.9 107.7 107.2 Retail prices (1982-1984=100): Consumer Price Index 160.1 160.3 160.5 160.8 All food 156.6 156.6 157.0 157.6 Dairy products 145.4 144.1 143.3 143.4 Fluid milk and cream 144.9 143.6 142.0 141.7 Manufactured products 146.6 145.2 145.4 145.8 Dairy product output (Mil. lb): Butter 102.7 82.0 80.0 68.8 American cheese 294.6 286.2 285.3 260.0 Other-than-American cheese 347.3 337.2 327.9 336.5 Frozen products (Mil. gal) 2/ 123.5 131.0 132.0 119.2 All products (milkfat basis 3/) 8,709 8,321 8,274 7,669 Nonfat dry milk 132.7 120.1 111.7 90.2 Beginning stocks (Mil. lb): Commercial butter 86.3 102.9 93.0 84.9 Commercial American cheese 428.6 446.1 464.2 469.0 Other cheese 126.8 138.2 140.4 135.9 Manufacturers' nonfat dry milk 118.5 151.2 173.3 158.7 All commercial (milkfat basis) 6,900 7,548 7,532 7,354 All commercial (skim solids basis 6,990 7,693 8,160 7,984 All Government (milkfat basis) 20 37 21 31 All Government (skim solids basis 13 12 8 55 Commercial disappearance (Mil. lb): Butter 83.1 87.5 83.5 81.3 American cheese 278.4 268.5 280.3 272.1 Other-than-American cheese 363.2 349.4 355.4 373.5 Nonfat dry milk 78.7 65.8 103.3 59.8 All products (milkfat basis 3/) 13,344 13,348 13,465 13,609 USDA net removals (Mil. lb): Butter 3.1 4.5 4.7 3.6 Cheese 1.3 2.2 1.6 0.6 Nonfat dry milk 21.7 32.7 23.2 35.1 All products (milkfat basis 3/) 89 130 126 101 All products (skim solids basis 3 271 408 289 425 Imports (Mil. lb, milkfat basis 3/) 196 205 206 228 International market prices (Dol/mt): Butter 1,725 1,713 1,715 1,844 Nonfat dry milk 1,725 1,711 1,650 1,620 1/ Grade AA Chicago before June 1998. 2/ Hard ice cream, ice milk, and sherbert. 3/ Milk equivalent. NA = Not Available. U.S. dairy situation at a glance Sep-97 Oct-97 Nov-97 Dec-97 Milk production: Production (Mil. lb., 20 States) 10,671 10,977 10,591 11,118 Milk cow (Thou., 20 States) 7,752 7,750 7,737 7,732 Milk per cow (Lb., 20 States) 1,377 1,416 1,369 1,438 Production (Mil. lb., U.S. est.) 12,423 12,818 12,363 12,973 Milk prices (Dol/cwt): All milk 13.10 14.10 14.70 14.80 Milk eligible for fluid use 13.10 14.10 14.70 14.80 Manufacturing grade milk 12.70 13.20 13.60 13.60 Basic Formula Price (3.5% fat) 12.79 12.83 12.96 13.29 Slaughter Cow, WI (Dol/cwt): 36.25 35.40 33.06 34.75 Wholesale prices (Cts/lb): Butter, Central States 1/ 101.6 135.3 148.8 120.1 American cheese, WI assembly pt. 40-pound blocks 141.4 142.4 143.8 146.1 Barrels 133.6 136.3 134.9 129.2 Nonfat dry milk, Central States 107.1 106.9 107.1 107.4 Retail prices (1982-1984=100): Consumer Price Index 161.2 161.6 161.5 161.3 All food 157.9 158.2 158.5 158.7 Dairy products 143.5 145.7 147.0 147.8 Fluid milk and cream 141.4 145.3 147.0 147.0 Manufactured products 146.4 146.8 147.6 149.3 Dairy product output (Mil. lb): Butter 79.3 83.3 89.1 106.0 American cheese 261.2 260.0 248.5 278.6 Other-than-American cheese 343.0 355.5 346.0 349.3 Frozen products (Mil. gal) 2/ 103.3 99.7 80.5 80.6 All products (milkfat basis 3/) 7,690 7,624 7,214 7,801 Nonfat dry milk 77.4 72.6 75.2 102.0 Beginning stocks (Mil. lb): Commercial butter 68.9 43.4 26.2 15.0 Commercial American cheese 459.2 433.8 414.7 405.3 Other cheese 122.8 109.6 90.2 68.9 Manufacturers' nonfat dry milk 154.6 133.9 114.8 100.6 All commercial (milkfat basis) 6,813 5,939 5,205 4,697 All commercial (skim solids basis 7,703 7,097 6,456 5,968 All Government (milkfat basis) 32 19 16 19 All Government (skim solids basis 84 99 171 257 Commercial disappearance (Mil. lb): Butter 101.0 96.8 95.0 94.9 American cheese 287.9 279.6 259.8 276.0 Other-than-American cheese 381.4 404.5 396.1 384.9 Nonfat dry milk 63.9 66.8 58.7 70.2 All products (milkfat basis 3/) 13,309 13,596 12,886 12,848 USDA net removals (Mil. lb): Butter 3.9 3.7 5.4 5.9 Cheese 0.4 1.2 0.8 0.5 Nonfat dry milk 34.7 24.9 31.9 31.7 All products (milkfat basis 3/) 103 105 146 158 All products (skim solids basis 3 417 312 396 393 Imports (Mil. lb, milkfat basis 3/) 228 266 275 342 International market prices (Dol/mt): Butter 2,008 2,165 2,194 2,187 Nonfat dry milk 1,694 1,729 1,731 1,649 1/ Grade AA Chicago before June 1998. 2/ Hard ice cream, ice milk, and sherbert. 3/ Milk equivalent. NA = Not Available. U.S. dairy situation at a glance Jan-98 Feb-98 Mar-98 Apr-98 Milk production: Production (Mil. lb., 20 States) 11,316 10,434 11,722 11,591 Milk cow (Thou., 20 States) 7,730 7,726 7,725 7,735 Milk per cow (Lb., 20 States) 1,464 1,351 1,517 1,499 Production (Mil. lb., U.S. est.) 13,255 12,221 13,725 13,509 Milk prices (Dol/cwt): All milk 14.70 14.70 14.40 14.00 Milk eligible for fluid use 14.70 14.80 14.50 14.00 Manufacturing grade milk 13.50 13.50 12.90 12.10 Basic Formula Price (3.5% fat) 13.25 13.32 12.81 12.01 Slaughter Cow, WI (Dol/cwt): 36.31 37.44 37.25 37.70 Wholesale prices (Cts/lb): Butter, Central States 1/ 109.2 139.8 134.1 136.4 American cheese, WI assembly pt. 40-pound blocks 144.5 144.7 138.8 129.7 Barrels 134.7 143.6 135.3 125.1 Nonfat dry milk, Central States 105.9 105.2 104.7 104.3 Retail prices (1982-1984=100): Consumer Price Index 161.6 161.9 162.2 162.5 All food 159.9 159.4 159.7 159.8 Dairy products 148.3 147.7 148.4 148.5 Fluid milk and cream NA NA NA NA Manufactured products NA NA NA NA Dairy product output (Mil. lb): Butter 113.5 102.7 100.8 103.0 American cheese 283.2 261.1 285.2 289.7 Other-than-American cheese 332.5 313.0 360.0 351.6 Frozen products (Mil. gal) 2/ 83.3 91.7 109.4 115.4 All products (milkfat basis 3/) 8,009 7,600 8,297 8,521 Nonfat dry milk 103.7 97.0 107.3 120.4 Beginning stocks (Mil. lb): Commercial butter 20.5 34.0 44.1 55.7 Commercial American cheese 410.3 411.7 410.5 421.0 Other cheese 70.0 81.7 98.8 98.2 Manufacturers' nonfat dry milk 103.3 104.1 105.3 92.7 All commercial (milkfat basis) 4,889 5,306 5,640 5,990 All commercial (skim solids basis 6,080 6,245 6,415 6,375 All Government (milkfat basis) 18 15 16 20 All Government (skim solids basis 258 286 310 427 Commercial disappearance (Mil. lb): Butter 97.6 91.4 89.1 91.8 American cheese 282.0 263.1 275.8 272.4 Other-than-American cheese 337.0 312.5 383.9 368.1 Nonfat dry milk 65.4 64.0 96.7 77.1 All products (milkfat basis 3/) 12,803 11,922 13,518 13,182 USDA net removals (Mil. lb): Butter 4.0 2.2 1.3 1.0 Cheese 0.7 0.7 0.6 0.6 Nonfat dry milk 37.5 31.8 24.7 26.8 All products (milkfat basis 3/) 123 76 53 38 All products (skim solids basis 3 468 395 309 323 Imports (Mil. lb, milkfat basis 3/) 196 215 310 279 International market prices (Dol/mt): Butter 2,091 1,888 1,844 1,835 Nonfat dry milk 1,560 1,510 1,480 1,491 1/ Grade AA Chicago before June 1998. 2/ Hard ice cream, ice milk, and sherbert. 3/ Milk equivalent. NA = Not Available. U.S. dairy situation at a glance May-98 Jun-98 Jul-98 Milk production: Production (Mil. lb., 20 States) 12,067 11,446 11,348 Milk cow (Thou., 20 States) 7,750 7,753 7,751 Milk per cow (Lb., 20 States) 1,557 1,476 1,464 Production (Mil. lb., U.S. est.) 14,058 13,330 13,161 Milk prices (Dol/cwt): All milk 13.20 13.50 14.30 Milk eligible for fluid use 13.30 13.50 14.30 Manufacturing grade milk 11.30 12.30 13.70 Basic Formula Price (3.5% fat) 10.88 13.10 14.77 Slaughter Cow, WI (Dol/cwt): 38.38 37.44 37.25 Wholesale prices (Cts/lb): Butter, Central States 1/ 153.2 186.7 203.1 American cheese, WI assembly pt. 40-pound blocks 123.0 151.3 162.6 Barrels 120.8 146.3 153.4 Nonfat dry milk, Central States 103.5 102.9 103.0 Retail prices (1982-1984=100): Consumer Price Index 162.8 163.0 NA All food 160.3 160.1 NA Dairy products 148.1 148.1 NA Fluid milk and cream NA NA NA Manufactured products NA NA NA Dairy product output (Mil. lb): Butter 92.2 NA NA American cheese 298.3 NA NA Other-than-American cheese 360.3 NA NA Frozen products (Mil. gal) 2/ 118.6 NA NA All products (milkfat basis 3/) 8,624 NA NA Nonfat dry milk 121.6 NA NA Beginning stocks (Mil. lb): Commercial butter 67.0 72.4 58.9 Commercial American cheese 441.4 442.5 459.1 Other cheese 103.1 109.2 116.8 Manufacturers' nonfat dry milk 113.1 132.7 122.7 All commercial (milkfat basis) 6,460 6,665 6,567 All commercial (skim solids basis 6,859 7,189 7,297 All Government (milkfat basis) 28 26 28 All Government (skim solids basis 568 646 808 Commercial disappearance (Mil. lb): Butter NA NA NA American cheese NA NA NA Other-than-American cheese NA NA NA Nonfat dry milk NA NA NA All products (milkfat basis 3/) NA NA NA USDA net removals (Mil. lb): Butter 0.7 0.0 0.0 Cheese 0.5 0.2 0.1 Nonfat dry milk 38.0 25.5 49.7 All products (milkfat basis 3/) 30.8 8.6 12 All products (skim solids basis 3 451 300 580 Imports (Mil. lb, milkfat basis 3/) NA NA NA International market prices (Dol/mt): Butter 1,838 1,933 1,988 Nonfat dry milk 1,493 1,523 1,437 1/ Grade AA Chicago before June 1998. 2/ Hard ice cream, ice milk, and sherbert. 3/ Milk equivalent. NA = Not Available. Annual Forecasts 1997 1998 1999 Economic Indicators /1 Real GDP, Billions '87$ 7,189 7,418 7,595 CPI-U, Annual % Change 1.9 1.7 3 Unemployment rate, % 5.0 4.6 5 3-Month T Bill,% 5.1 5.1 5 10-Year Bond,% 6.4 5.7 6 Production, million lb. Beef 25,384 25,778 23,850 Pork 17,244 18,792 19,550 Broilers 27,271 27,805 29,200 Turkeys 5,478 5,335 5,300 Total Red Meat & Poultry 76,322 78,572 78,738 Eggs, mil doz. 5,456 5,581 5,675 Milk 156,602 157,906 160,100 Commercial use (mf basis) 156,576 159,450 161,100 Net removals (mf basis) 1,108 430 900 Per capita consumption, Retail Beef 66.9 68.5 63 Pork 48.7 51.9 54 Broilers 72.7 72.4 76 Turkeys 17.6 17.7 17 Total Red Meat & Poultry 208.6 212.7 212 Eggs, number 239 243 244 Market Prices Choice steers, Neb., $/cwt. 66.32 61-65 71-76 Feeder steers,Ok City,$/cwt 76.19 72-77 82-89 Bng Ut Cows,S. Falls,$/cwt. 34.27 37-40 44-48 Barrows & gilts,Ia/Mn.,$/cw 51.36 34-36 34-37 Broilers, 12 City, cents/lb 58.78 60-64 56-61 Turkeys, Eastern, cents/lb. 64.93 58-63 60-64 Eggs, New York, cents/doz. 81.23 73-78 70-75 Milk, all at plant, $/cwt. 13.01 14.6-14.8 13.1-14.2 Milk, M-W, $/cwt. 11.53 13.1-13.3 11.7-12.7 U.S. Trade, million lb. Beef & veal exports 2,136 2,100 2,155 Beef & veal imports 2,343 2,615 2,760 Pork exports 1,044 1,260 1,300 Pork imports 633 585 570 Broiler exports 4,664 5,066 5,125 Turkey exports 598 510 580 /1 Macro economic forecasts: Survey of Professional Forecasters Philadelphia Federal Reserve, May 1998 Quarterly 1997/99 Forecasts QI'97 QII'97 QIII'97 Economic Indicators /1 Real GDP, Billions '87$ 7,089 7,140 7,222 CPI-U, Annual % Change 2.4 1.1 2.0 Unemployment rate, % 5.3 4.9 4.9 3-Month T Bill,% 5.1 5.1 5.1 10-Year Bond,% 6.6 6.7 6.2 Production, million lb. Beef 6,107 6,416 6,603 Pork 4,192 4,090 4,196 Broilers 6,639 6,937 6,864 Turkeys 1,236 1,404 1,411 Total Red Meat & Poultry 18,428 19,082 19,287 Eggs, mil doz. 1,349 1,341 1,354 Milk 38,961 40,683 38,805 Commercial use (mf basis) 38,036 38,855 40,369 Net removals (mf basis) 97 272 330 Per capita consumption, Retail Beef 16.3 17.3 17.1 Pork 11.8 11.6 12.0 Broilers 17.7 18.8 18.6 Turkeys 3.5 4.0 4.2 Total Red Meat & Poultry 49.9 52.3 52.5 Eggs, number 59.0 59.2 59.5 Market Prices Choice steers, Neb., $/cwt. 66.40 66.63 65.65 Feeder steers,Ok City,$/cwt 69.44 75.88 80.44 Bng Ut Cows,S. Falls,$/cwt. 32.02 37.05 35.20 Barrows & gilts,Ia/Mn.,$/cw 51.06 56.41 54.45 Broilers, 12 City, cents/lb 60.00 59.10 62.00 Turkeys, Eastern, cents/lb. 58.90 66.10 68.20 Eggs, New York, cents/doz. 84.90 72.10 79.70 Milk, all at plant, $/cwt. 13.47 12.70 12.93 Milk, M-W, $/cwt. 12.30 11.91 10.96 U.S. Trade, million lb. Beef & veal exports 455 513 600 Beef & veal imports 536 716 576 Pork exports 195 273 272 Pork imports 158 150 157 Broiler exports 1,090 1,098 1,223 Turkey exports 128 149 162 /1 Macro economic forecasts: Survey of Professional Forecasters Philadelphia Federal Reserve, May 1998 QIV'97 QI'98 QII'98 Economic Indicators /1 Real GDP, Billions '87$ 7,290 7,356 7,400 CPI-U, Annual % Change 2.5 0.5 1.6 Unemployment rate, % 4.7 4.7 4.5 3-Month T Bill,% 5.1 5.3 5.1 10-Year Bond,% 5.9 6.8 5.7 Production, million lb. Beef 6,258 6,215 6,463 Pork 4,766 4,687 4,430 Broilers 6,831 6,845 6,960 Turkeys 1,428 1,290 1,320 Total Red Meat & Poultry 19,525 19,271 19,385 Eggs, mil doz. 1,412 1,382 1,374 Milk 38,153 39,209 40,997 Commercial use (mf basis) 39,316 38,245 40,705 Net removals (mf basis) 409 252 78 Per capita consumption, Retail Beef 16.2 16.7 17.3 Pork 13.3 12.7 12.3 Broilers 17.6 17.7 18.4 Turkeys 6.0 3.9 3.9 Total Red Meat & Poultry 53.9 51.7 52.6 Eggs, number 61.8 60.1 60.0 Market Prices Choice steers, Neb., $/cwt. 66.61 61.73 64.16 Feeder steers,Ok City,$/cwt 78.98 75.49 74.00 Bng Ut Cows,S. Falls,$/cwt. 32.80 38.28 39.15 Barrows & gilts,Ia/Mn.,$/cw 43.53 34.74 39.42 Broilers, 12 City, cents/lb 54.00 56.40 61.00 Turkeys, Eastern, cents/lb. 66.50 55.10 59.10 Eggs, New York, cents/doz. 88.20 79.00 66.50 Milk, all at plant, $/cwt. 12.93 14.60 13.57 Milk, M-W, $/cwt. 10.96 13.13 12.00 U.S. Trade, million lb. Beef & veal exports 568 500 525 Beef & veal imports 515 644 710 Pork exports 304 296 340 Pork imports 168 154 143 Broiler exports 1,253 1,241 1,275 Turkey exports 160 100 120 /1 Macro economic forecasts: Survey of Professional Forecasters Philadelphia Federal Reserve, May 1998 QIII'98 QIV'98 QI'99 Economic Indicators /1 Real GDP, Billions '87$ 7,440 7,482 7,524 CPI-U, Annual % Change 2.3 2.4 2.3 Unemployment rate, % 4.6 4.7 4.7 3-Month T Bill,% 5.1 5.2 5.3 10-Year Bond,% 5.8 5.8 5.8 Production, million lb. Beef 6,875 6,225 5,850 Pork 4,675 5,000 4,850 Broilers 7,000 7,000 7,100 Turkeys 1,350 1,375 1,200 Total Red Meat & Poultry 20,096 19,820 19,228 Eggs, mil doz. 1,400 1,425 1,400 Milk 39,000 38,700 39,800 Commercial use (mf basis) 40,600 39,900 38,900 Net removals (mf basis) 100 200 Per capita consumption, Retail Beef 18.1 16.4 15.8 Pork 13.1 13.8 13.3 Broilers 18.3 17.9 18.5 Turkeys 4.1 5.7 3.5 Total Red Meat & Poultry 54.1 54.4 51.7 Eggs, number 60.6 61.9 60.3 Market Prices Choice steers, Neb., $/cwt. 60-62 70-76 70-76 Feeder steers,Ok City,$/cwt 71-73 82-88 80-86 Bng Ut Cows,S. Falls,$/cwt. 37-37 44-48 43-47 Barrows & gilts,Ia/Mn.,$/cw 34-34 31-33 33-35 Broilers, 12 City, cents/lb 68-70 54-58 56-60 Turkeys, Eastern, cents/lb. 62-64 65-71 54-58 Eggs, New York, cents/doz. 74-76 77-83 72-78 Milk, all at plant, $/cwt. 15.1-15.3 12.8-13.3 13.6-14.8 Milk, M-W, $/cwt. 14.6-14.8 12.8-13.3 11.9-12.9 U.S. Trade, million lb. Beef & veal exports 545 530 475 Beef & veal imports 675 586 680 Pork exports 300 324 320 Pork imports 143 145 150 Broiler exports 1,225 1,325 1,225 Turkey exports 140 150 130 /1 Macro economic forecasts: Survey of Professional Forecasters Philadelphia Federal Reserve, May 1998 QII'99 Economic Indicators /1 Real GDP, Billions '87$ 7,567 CPI-U, Annual % Change 2.6 Unemployment rate, % 4.8 3-Month T Bill,% 5.1 10-Year Bond,% 6.0 Production, million lb. Beef 5,975 Pork 4,775 Broilers 7,400 Turkeys 1,350 Total Red Meat & Poultry 19,703 Eggs, mil doz. 1,400 Milk 41,500 Commercial use (mf basis) 40,100 Net removals (mf basis) 200 Per capita consumption, Retail Beef 16.0 Pork 13.0 Broilers 19.5 Turkeys 3.8 Total Red Meat & Poultry 52.9 Eggs, number 60.4 Market Prices Choice steers, Neb., $/cwt. 72-78 Feeder steers,Ok City,$/cwt 84-90 Bng Ut Cows,S. Falls,$/cwt. 45-49 Barrows & gilts,Ia/Mn.,$/cw 36-38 Broilers, 12 City, cents/lb 57-61 Turkeys, Eastern, cents/lb. 58-62 Eggs, New York, cents/doz. 62-68 Milk, all at plant, $/cwt. 12.7-13.7 Milk, M-W, $/cwt. 11.3-12.2 U.S. Trade, million lb. Beef & veal exports 535 Beef & veal imports 750 Pork exports 330 Pork imports 140 Broiler exports 1,225 Turkey exports 135 /1 Macro economic forecasts: Survey of Professional Forecasters Philadelphia Federal Reserve, May 1998 Special Article Concentration in the U.S. Beef Packing Industry by Ken Nelson and William Hahn For much of the 1990s, livestock producers have expressed growing concern about the level of concentration in meatpacking. Concentration reached 82 percent for steer and heifer purchases in 1993. A few examples illustrate the broad spectrum of attention: Congressionally mandated studies (Concentration in the Red Meat Packing Industry, USDA, GIPSA, February 1996), legal proceedings (P&S Docket No. D-95-0049), a petition (Federal Register, July 14, 1997), a Congressional hearing (Committee on Agriculture, Nutrition and Forestry, United States Senate, June 10, 1998) and proposed legislation (Amendments to S2159). Historic Perspective Public anxiety is not new -- market power in the meat packing industry has been a periodic concern since at least the 1880s. Early in this century, meat packing was dominated by five firms, commonly referred to as the "Big Five": Armour, Cudahy, Morris (Morris later merged with Armour), Swift, and Wilson. Several species of livestock were typically slaughtered within a multistory, gravity-powered plant, generally located at or near a terminal livestock market. Packer branch houses (sales warehouses) in population centers provided a local sales outlet to what were then small retailers. The Packer Consent Decree of 1920 resulted from a Federal Trade Commission (FTC)investigation of the meatpacking industry alleging many anti-competitive practices by the Big Five and the threat of Dept. Of Justice court action. Allegations included the use of collusive devices such as market pooling. The packers entered into a consent decree with comprehensive and restrictive provisions. Packers agreed 1) to divest themselves of public stockyards, stockyard railroads, market newspapers, and cold storage facilities; 2) not to engage in retailing of meat and other commodities; and 3) to submit to the perpetual jurisdiction of the U.S. District Court. Because of mergers, reorganizations, and court actions, the decree has little or no practical effect today. The FTC action precipitated the passage of the Packers and Stockyards Act in 1921, which gave regulatory powers over meatpacking to the Packers and Stockyards Administration (now part of USDA's Grain Inspection, Packers and Stockyards Administration [GIPSA]). Following the consent decree, the proportion of slaughter accounted for by the largest four firms (estimated in the 50-75 percent range at the time of the decree)declined. The decree was partially the cause, improved roads and transport equipment, roads, and communication; the increased use of Federal grades for beef; and the movement of livestock production further west, and the growth of retail chains were also important. Following World War II these forces for change accelerated. New independent single species, single story slaughter plants were built near production areas and away from terminal markets. The market shares of the largest four firms declined rapidly with the concentration ratio for the top four firms (CR-4) for cattle slaughter declining to 30 percent by 1956 and bottoming out around 22 percent in the 1960s. Emergence of the new innovative independent packers occurred in the 1960s. The new packers were not bound by the consent decree nor by master labor agreements. Old line packers were largely superseded by the new packers (especially in beef) in the 1970s. Sales of further cutup primals (boxed beef) rapidly replaced carcass sales as packers increasingly performed tasks formerly done in the back room of retail stores. Major packer mergers and consolidation took place in the 1980s and the CR-4 for cattle peaked at 69 percent in 1995. The steer and heifer CR-4 peaked at 82 percent in 1994 then dropped slightly to 80 percent in 1996 and 1997 (based on FI slaughter, Table 1). The names of the original Big Fie no longer appear as independent firms among large meatpackers. According to Meat Processing magazine, the top four companies in beef packing and processing in 1997 were IBP Inc., ConAgra Inc. (Monfort), Cargill (Excel), and Farmland Meats Group with reported sales were $13.26 billion, $13.17 billion, $9 billion, and $3.6 billion respectively. Each of the four is also important in pork packing and two in poultry. (Meat Processing, Top 200 Meat Packers Processors, and Poultry Companies, June 1998, p. 47.) Table 1-- Four Firm Concentration in Livestock Procurement by U.S. Meatpackers. Reporting Years 1980 - 1997 ______________________________________________________________ Year Cattle/1 Steers & Cows & Hogs Sheep & heifers bulls lambs ______________________________________________________________ Percent of total commercial slaughter 1980 28 36 10 34 56 1981 31 40 10 33 53 1982 32 41 9 36 44 1983 36 47 10 29 44 1984 37 50 11 35 49 1985 39 50 17 32 51 1986 42 55 18 33 54 1987 54 67 20 37 75 1988 57 70 18 34 77 1989 57 70 18 34 74 1990 59 72 20 40 70 Percent of Federally Inspected slaughter 1991 61 75 21 43 72 1992 64 79 24 44 71 1993 68 82 25 43 73 1994 68 82 25 43 75 1995 69 81 26 46 72 1996 67 80 27 56 73 1997 68 80 28 54 70 ______________________________________________________________ 1/ Includes steers, heifers, cows, and bulls. Note: All figures for years 1980 through 1990 are based on firms' fiscal years as reported to GIPSA. Figures for 1991 through 1997 are based on calendar year federally-inspected slaughter. Source: USDA, GIPSA Another, measure of concentration is the Herfindahl-Hirshman Index (HHI), also reported by GIPSA. The HHI has the advantage of taking into account the number, percent, and relative distributional shares of the market held by all firms, not just the largest few. The HHI is calculated by summing each firm's squared percentage of the market. If 100 firms each have a 1-percent share the HHI will equal 100. If 1 firm has 100 percent of the market the HHI equals 10,000. The Department of Justice and Federal Trade Commission Horizontal Merger Guidelines (April, 1992) provide insight into the HHI levels traditionally considered important in determining whether mergers within a relevant market are likely to be challenged by the Justice Department. Post-Merger HHI below 1,000. The Agency regards markets in this region to be unconcentrated. Post-Merger HHI between l,000 and l,800. The Agency regards markets in this region to be moderately concentrated. Mergers producing an increase in the HHI of less than l00 points in moderately concentrated markets post-merger are unlikely to have adverse competitive consequences and ordinarily require no further analysis. Post-Merger HHI above l,800. The Agency regards markets in this region to be highly concentrated. Mergers producing an increase in the HHI of less than 50 points, even in highly concentrated markets post-merger, are unlikely to have adverse competitive consequences and ordinarily require no further analysis. Mergers producing an increase in the HHI of more than 50 points in highly concentrated markets post-merger potentially raise significant competitive concerns, depending on the factors set forth in Sections 2-5 of the Guidelines. Where the post-merger HHI exceeds 1,800, it will be presumed that mergers producing an increase in the HHI of more than 100 points are likely to create or enhance market power or facilitate its exercise. The presumption may be overcome by a showing that factors set forth in Sections 2-5 of the Guidelines make it unlikely that the merger will create or enhance market power or facilitate its exercise, in light of market concentration and market shares(Section 1.5). Table 2 Steer and heifer slaughter, plants and firms reporting to GIPSA, and HHI. __________________________________ Year Mil. Plants Firms HHI head __________________________________ 1980 24.5 626 561 561 1981 25.5 539 485 643 1982 25.5 513 467 683 1983 26 510 458 862 1984 26.2 479 430 944 1985 27 436 389 999 1986 26.6 384 341 1,088 1987 27.1 386 335 1,435 1988 27.2 374 321 1,589 1989 25.9 319 282 1,602 1990 25.8 310 275 1,661 1991 25.4 288 254 1,766 1992 25.3 268 230 2,005 1993 25.6 261 217 2,052 1994 26.1 230 195 2,096 1995 27.3 216 182 1,982 ___________________________________ Source: GIPSA, 1995 Statistical Report, Table 27. The HHI for U.S. steer and heifer slaughter was 999 in 1985, 1,661 in 1990, and 1,982 in 1995-- well above the 1,800 level. For total cattle slaughter the HHIs are much lower, reaching 1,437 in 1995. For U.S. boxed fed beef the HHI's for 85, 90, and 95 are 1,527; 1,988; and 2,208, respectively. If the relevant market were defined as U.S. steer and heifer slaughter or U.S. fed boxed beef production it appears any future sizable mergers would be candidates for challenge. On the other hand, if the relevant market were defined as cattle slaughter or all livestock purchases, a merger challenge based on HHI would be less likely. Economies of Size Meatpacking is a margin or cost-driven industry, with the possible exception of specialty value added and niche markets. General livestock and meat price levels are of less significance to profitability in commodity meatpacking than are margins, the difference between prices paid for livestock and prices received for wholesale meat. If prices paid and received are similar across firms, profitability depends mainly on costs. The decrease in numbers of smaller meatpacking plants and increases in the number and proportion of slaughter accounted for by larger plants suggest that costs incurred by large plants are lower. The lower cost hypothesis has been researched and several studies have consistently reported the existence of economies of size in beef packing. (See Ward, C.E., "Comparative Analysis of Cattle Slaughtering and Fabricating Costs." Agribusiness: An International Journal 9(1993):441-51) and (Duewer, L.A., and Nelson K.E., Beef Packing and Processing Plants: Computer Assisted Cost Analysis. USDA, ERS, CED, AGES 9115, April 1991; MacDonald et al., Consolidation in U.S. Meatpacking, ERS, USDA forthcoming) An economically significant cost advantage is frequently reported by theses studies for large compared to medium size beef slaughter and fabricating plants. Large plants have greater cost advantages than small plants. Costs are lower also when plants are operated at optimum utilization levels, which creates an incentive for a consistent reliable supply of livestock for slaughter. The existence of size and utilization technical economies in beef packing provides one competitive explanation for industry consolidation but does not, in and of itself, preclude the exercise of market power by dominant firms. Producers have expressed anxiety about packer concentration primarily in three basic areas, all relating to ability to sell and impact on general price levels or prices received in a local area or by a particular producer compared to others. The three areas are 1) access to a market for cattle (or chain space); 2) number of, and quality of competition among, buyers for cattle; and 3) monopsony-based distortions in cattle prices. One price variable producers frequently criticize is a widening price difference between the farm and wholesale or retail levels especially when live prices are falling. Price Spreads Price spreads for meat cannot be used to directly evaluate profitability of meatpackers. But spreads can be used to compare prices and values at successive levels of the marketing chain to see how quickly and completely price and cost changes are transmitted through the marketing system. We can examine the components of the spread to see which segments of the industry are increasing and decreasing their share of consumer dollars in combined costs and profits and whether such changes are related to the level of concentration. (For a detailed discussion of price spreads see Agricultural Outlook, December 1997, p 11). A model similar to that used by Hahn (Hahn. Asymmetry in Price Transmission for Beef and Pork, Technical Bulletin No. 1769, United States Department of Agriculture Economic Research Service, Washington, DC, December 1989.) was estimated and used to explain those factors that are related to changes in the net- farm, wholesale, and retail values of beef. Hahn's model is an asymmetric model of price formation and transmission. An asymmetric model allows (but does not require) the spread of adjustments in prices to depend on what direction the prices are going. Past research has demonstrated that beef prices at all levels adjust more quickly when they are increasing than when they are decreasing. The way that we accommodate asymmetry is to divide price changes into two parts: increasing prices and decreasing prices. There are three equations in the model and they allow the model to determine the changes in the net farm, wholesale, and retail prices of beef. The market for beef also determines cattle supply, beef demand, and beef trade. In setting up our asymmetric model, we assumed that the price determination parts could be separated from the parts determining the various quantities. The first equation we specified is called the price level equation. In many studies of price transmission, it is assumed that wholesale and retail prices follow farm prices. We set up our model so that it allows for more complex price formation. Equation 1 has the form: EQUATION 1: alpha{1,r}*( Increases in the Retail Price ) + alpha{1,w}*( Increases in the Wholesale Price ) + alpha{1,f}*( Increases in the Farm Price ) + beta{1,r}*( Decreases in the Retail Price ) + beta{1,w}*( Decreases in the Wholesale Price ) + beta{1,f}*( Decreases in the Farml Price ) = supply and demand shifters that determine "desired" price level - gamma(r) *( Last Month's Retail Price ) - gamma(w) *( Last Month's Wholesalel Price ) - gamma(f) *( Last Month's Farm Price ) . All the alpha, beta, and gamma terms in the equation above are positive. The supply and demand shifters determine the long-run price level. Last month's price level is compared to this month's long run target and prices adjust to move toward the target. Last month's level is a weighted average of last month's retail, wholesale, and farm levels. When the desired price level is above last month's price level, some or all of the prices have to increase and vice versa. The second equation in the model is the farm-wholesale spread equation. It has the form: EQUATION 2: + alpha{2,w}*( Increases in the Wholesale Price ) - alpha{2,f}*( Increases in the Farm Price ) + beta{2,w} *( Decreases in the Wholesale Price ) - beta{2,f} *( Decreases in the Farml Price ) = supply and demand shifters that determine "desired" price spread - ( Last Month's Farm-Wholesale Price Spread ). Again, the alphas and betas are positive. The third equation in the model is the wholesale-retail spread equation. It has the form: EQUATION 3: alpha{3,w}*( Increases in the Retail Price ) - alpha{3,f}*( Increases in the Wholesale Price ) + beta{3,w} *( Decreases in the Retail Price ) - beta{3,f} *( Decreases in the Wholesale Price ) = supply and demand shifters that determine "desired" price spread - ( Last Month's Wholesale-Retail Price Spread ) Again, the alphas and betas are positive. If a price's alpha and beta coefficients are the same in an equation, the variable has a symmetric effect in that equation. If all the alphas match their respective betas price transmission is symmetric. Our statistical tests reject symmetry in general. However, the farm-to-wholesale spread equation is symmetric and the coefficients are such that a one-cent change in the wholesale price level implies a one-cent change in the farm price level. Also, the coefficients imply that it takes some time for all prices to adjust to changes in market conditions. The table below shows the estimated alpha, beta, and gamma coefficients. The alphas and betas that were subtracted in the spread equations have minus signs attached. Table 3--Asymmetric adjustment coefficients (the alphas & betas) _________________________________________________________________ Equation Price Retail Wholesale Net direction price price farm value _________________________________________________________________ Price level equation up 2.152 0.165 Farm-wholesale spread up 3.969 -3.969 Wholesale-retail spread up 2.733 Price level equation down 1.786 2.501 Farm-wholesale spread down 3.969 -3.969 Wholesale-retail spread down 3.780 -0.388 Lagged price coefficients (the gammas) Price level equation 0.833 0.167 _________________________________________________________________ The price-level estimates imply that none of the three prices actually leads the others. All three prices adjust slowly to changes in market conditions. Lagged values of the retail and farm price determine the lagged price level, and because of the relationship between the alphas and betas in the farm-to-wholesale price equation, both the farm price and the wholesale price move the same amount in reaction to price-level adjustments. Current farm and wholesale prices depend on lagged retail, wholesale, and farm prices. The current retail price is most sensitive to lagged retail and wholesale prices. In order to evaluate the influence of concentration, we included the HHI as an explanatory variable in the model. If meatpackers have and exercise market power, they could either lower the prices they pay for cattle or raise the price at which they sell beef, or both. Higher market power could lead to a wider spread between live and wholesale beef prices. So, we included HHI as an explanatory variable that affects the level of the "desired" farm-to-wholesale spread. We do not expect packer market power to affect the wholesale-to-retail spread; however, by depressing farm prices and/or raising wholesale prices, market power could affect the over-all price level. So we also included the HHI as a factor affecting the desired longrun price level. The HHI's affect on the farm-to-wholesale price spread is small and negative while its effect on the overall price level is smaller and positive. When we calculate the longrun effect of changes in the HHI, we find that it has practically no effect on the wholesale and retail price, but that a one-percent increase in the HHI raises the net farm value by about 1 cent. This relationship between the HHI and prices is not consistent with the exploitation of market power. It is more consistent with a increasing concentration lowering costs with these cost reductions allowing packer to pay more for cattle. This research as well as a simple inspection of price spread data (figure 1) indicates that the beef farm-to-wholesale price spread has generally declined in real (adjusted for inflation) terms over the last three decades. Cost-reducing industry changes have been (at least partially) passed backward to producers or forward to consumers. The longer-term average deflated wholesale to-retail spreads have remained fairly steady or widened over the same period. In the short term, variability in price spreads is expected to be associated with pressure on slaughter capacity. The supply of meatpacking services is relatively fixed by available capacity. So increased (decreased) slaughter numbers mean increased (decreased) demand for slaughter and processing services (and vice versa) and subsequent increase (decrease) in the price of slaughter services (the margin). Over the longer term slaughter capacity can adjust to existing and expected slaughter numbers and price spreads can adjust toward a longer-run equilibrium. This relationship is difficult to examine statistically because appropriate data on plant utilization is not readily available. Captive Supplies Controversy has surrounded packer procurement of a portion of their cattle through owned cattle, forward contracts, and marketing agreements (often popularly referred to as captive supplies). Arrangements include 1) cattle sold by feedlots to packers using forward contracts that are generally basis contracts or flat price contracts; 2) cattle sold by feedlots to packers via marketing agreements with price typically established using a negotiated formula, typically consisting of a base price and perhaps premiums or discounts for quality differences; and 3) cattle that were owned and controlled by packers during feeding (Schroeder, Ward, Mintert, and Peel, 1997 p.36.) Such arrangements accounted for about 22 percent of the fed cattle procured by the largest 4 and largest 15 beef packers in 1996, roughly equal to or less than the percentage in 1989 (Table 4). Several factors create the incentive for supply arrangements. For cattle feeders the arrangements can reduce price risk, aid in obtaining financing, ensure a buyer for cattle, reduce marketing costs, secure premiums for certain characteristics, make carcass quality information available, increase feedlot utilization and improving the packer-to-feedlot relationship. The arrangements can benefit packers by securing slaughter needs, improving quality of supplied cattle, reducing procurement costs, and reducing price risk. (see Schroeder, Ward, Mintert, and Peel, 1997, p 38). Critics object that these procurement practices thin the market by removing cattle and packer buyers, and "..cuts the tops off the market, by assuring that the packers never get truly desperate for cattle.." (Report of the USDA Advisory Committee On Agricultural Concentration: minority view, p 30). Critics also decry the use of formula pricing in some marketing arrangements saying the "...problem lies in the base from which the carcass value is calculated. ..the packer has the power to artificially lower the base price from which premiums and discounts are paid (Minority view, p.31). The 1996 USDA Advisory Committee On Agricultural Concentration stated: "Captive supplies and other forms of vertical integration and coordination at levels in which they occur in some regions and at some times of the year are potentially detrimental to both competition and price discovery. These arrangements have a tendency to thin market price reporting (reduce the volumes on which reported prices are based) and shorten the weekly marketing window,' which can disadvantage suppliers who do not have a packer arrangement and distort reported prices downward" (p. 9). These concerns are directly related to concentration because, were it not for high concentration, the practices would probably not cause so much concern about impacts on cash prices. Do captive supplies impact cattle prices? Researchers conclude: " the balance of research on the short-run impacts of captive supply on fed cattle cash market prices indicates that price impacts are negative, but very small" (Schroeder, Ward, Mintert, and Peel, 1997, p. 40). They state further: "Two questions that surfaced recently relative to packer concentration and captive supplies are: (1) whether recent declines in fed cattle prices have been created by packer captive supply? And (2) whether recent high margins of beef packers are related to captive supply levels? The answer to each is no." (Shroeder et al. p. 41) Table 4 Packer feeding and acquisition of cattle through forward contracts and marketing agreements as a percentage of leading packers' total steer and heifer slaughter, 1988-1996. _____________________________________________________________ 4 largest beef packers : 15 largest beef packers _____________________________________________________________ Year: Packer :Contracts :Total :Packer : Contracts :Total fed : and : : fed : and : cattle : agreements: :cattle :agreements : _____________________________________________________________ percent 1988 4.7 15.8 20.5 5.0 14.3 19.3 1989 5.6 19.3 24.9 5.2 17.2 22.4 1990 5.1 15.1 20.1 5.0 13.9 18.9 1991 4.7 14.0 18.7 4.5 12.7 17.2 1992 4.1 16.7 20.8 4.1 15.3 19.4 1993 3.8 13.7 17.5 4.1 13.3 17.4 1994 3.9 17.0 20.9 4.0 16.5 20.5 1995 3.2* 18.1* 21.3* 3.3* 17.8* 21.1* 1996 3.4 19.2* 22.5 3.3 18.8 22.2 _____________________________________________________________ Source: USDA, GIPSA, Packers and Stockyards Statistical Report, 1995 reporting year. p.33 (* corrected by GIPSA). Profits Profits of meatpackers in general (all species) were significantly higher in 1994 and 1995 than in 1992 and 1993 . Operating income per dollar of sales for the top 40 meatpacking firms was about 3 times higher in the later years. Profit ratios for the top 4 firms, however, are lower than those for the top 40 for most measures in most years (suggesting higher profitability for firms 5 though 40 than for firms 1 through 4) (table 5). Table 5-- Financial ratios for meatpacking firms 1992-1995. _______________________________________________________________ Item 1992 1993 1994 1995 _______________________________________________________________ Top four firms Percent of Sales Net Sales 100.00 100.00 100.00 100.00 Livestock purchases 81.06 81.53 79.58 73.34 Total cost of sales 85.73 87.46 85.42 82.52 Total operating expenses 13.73 11.86 12.47 14.15 Operating income (loss) .54 .68 2.11 3.33 Ratio Operating income per Dollar of sales .005 .007 .021 .033 Operating income per Dollar of assets .033 .043 .117 .178 Operating income per Dollar of equity .057 .081 .206 .291 --------------------------------------------------- Top 40 firms Percent of Sales Net Sales 100.00 100.00 100.00 100.00 Livestock purchases 69.96 70.58 64.71 60.08 Total cost of sales 82.60 83.83 81.76 79.26 Total operating expenses 16.18 14.96 15.36 17.05 Operating income (loss) 1.23 1.21 2.89 3.69 Ratio Operating income per Dollar of sales .012 .012 .029 .037 Operating income per Dollar of assets .065 .064 .117 .137 Operating income per Dollar of equity .121 .133 .239 .277 ________________________________________________________________ Source: GIPSA Packers and Stockyards Statistical Report. 1995 Reporting year. Table 35 and 36. Profitability in meatpacking has historically been characterized as a low profit industry with alternating periods of higher and lower returns based on many factors including livestock slaughter volume relative to available capacity. GIPSA data are not available for 1996 or 1997 but based on reported profits of some major packers, industry profit rates for 1996 probably were down significantly from 1995. For example, IBP's 10KA report to the Securities and Exchange Commission for fiscal 1997 reports: Table 6 --Financial information from IBP 10K report. ______________________________________________________________ 1997 1996 1995 1994 ______________________________________________________________ IBP Net sales (in millions) $13,258.8 $12,538.8 $12,667.6 $12,075.4 IBP Earnings from operations(000$) 226,716 322,908 480,096 347,337 IBP Net earnings Per share ($) 1.25 2.07 2.69 1.90 ______________________________________________________________ Source: United States Securities And Exchange Commission, Form 10-k, Annual Report, For the fiscal year ended December 27, 1997, IBP, Inc. Policy Issues Attempts to affect the behavior of packers with regard to procurement practices and price reporting arise from several quarters. In August 1995, GIPSA filed a complaint against IBP alleging that beginning in February 1994, IBP Inc. purchased cattle under an exclusive marketing agreement, in violation of the Packers and Stockyards Act. Specifically the complaint stated that "Respondent was giving an undue or unreasonable preference to a select group of feedyards known as the Beef Marketing Group, by using the Kansas practical top price, adjusted for quality, to calculate bids; and engaged in discriminatory practices by not offering the same pricing method to other feed yards. In September 1997 Administrative Law Judge Palmer " issued a Decision and Order concluding that Respondent did not violate section 202 (a) or (b) of the Packers and Stockyards Act and dismissing the Complaint." GIPSA appealed to the Judicial Officer (JO)in November 1997. The JO decision in July 1998 reads in part: "Based upon a careful consideration of the record in this proceeding, I find that Respondent's right of first refusal under the Beef Marketing Agreement violates the Packers and Stockyards Act because Respondent's right of first refusal has the effect or potential effect of reducing competition. While I disagree with the Chief ALJ's conclusion that the Respondent did not violate the Packers and Stockyards Act, I agree with most of the Chief ALJ's findings of fact and discussion. Therefore, except with respect to the Chief ALJ's conclusion and order, I adopt the Chief ALJ's Initial Decision and Order as the final Decision and Order of this proceding." The JO also clarified some issues of jurisdiction. The JO agreed with [GIPSA] that "... the Packers and Stockyards Act gives the Secretary of Agriculture broad authority to regulate the manner in which packers conduct business, including livestock procurement methods, such as [IBP's] use of the Beef Marketing Agreement." On August 12, 1998, IBP appealed the decision and order rendered by USDA's Judicial Officer. The Eighth Circuit Court of Appeals in St. Louis, Missouri, will hear the appeal. IBP also filed a motion for a stay of the judicial officer's order pending the outcome of its appeal. Concern about concentration has also caused some groups to advocate actions with regard to cattle procurement and price reporting. A petition, and pending legislation contain provisions calling for prohibiting or limiting the use of packer procurement of cattle through forward contracts; prohibiting packers from owning and feeding cattle unless sold in an open market; and or mandating that cattle buyers/sellers must report prices and terms of sale. Schroeder, Ward, Mintert and Peel comment in general on such regulatory action on captive supplies: "Clearly such policies have costs and benefits. Benefits of such policies include placing cattle that might be removed from the cash market trade back into the cash market. This would improve cash market liquidity, and if marketings and prices of these cattle were publicly reported when the cattle were sold, it would likely increase market information. In addition, this would force beef packers to compete head-to-head in the cash market for all fed cattle slaughter needs which may increase the number of bidders at particular feedlots on any particular day. Though the total number of buyers and level of concentration would remain unchanged". "However, restricting the use of captive supply arrangements would also come with significant economic costs. First, banning forward contracts eliminates a risk reduction tool for both cattle feeders and beef packers Suspending forward contracts would eliminate an important tool for packers to use to assure slaughter needs. This would increase packers' risk of not being able to operate plants at capacity and likely result in some long run reductions in fed cattle prices and/or increases in wholesale beef prices." Precluding use of marketing agreements could also reduce the percentage of cattle sold on a value-based pricing system. SUMMARY OF RESEARCH ON EFFECTS OF CONCENTRATION Ward (Packer Concentration and Its Impacts, Oklahoma, Cooperative Extension Service, Division of Agricultural Sciences and Natural Resources) summarizes several studies and issues surrounding impacts of packer concentration and concludes: In summary, fewer and larger meatpackers have resulted in increased plant and industry efficiency. Several studies have also suggested that larger meatpackers have exercised a small degree of market power in livestock procurement. One study indicates the "most plausible" estimate of non-competitive pricing is less than 1 percent of prices paid for livestock (referring to Azzam and Schroeter 1991). Concentration inmeatpacking is high, especially for fed cattle slaughtering and fabricating. We must not lose sight o the fact that concentration has increased in part as meatpacking firms increased industry efficiency. Research to date suggests price impacts from packer concentration have been negative in general, but small. Also, research shows that efficiency gains from moving to fewer and larger meatpackers have more than offset any market power impacts. Another study contracted by GIPSA summarizes research, Azzam and Anderson reviewed the literature on structure, conduct, and performance issues related to the meatpacking industry. GIPSA summarized the conclusions from the Azzam and Anderson study as follows: "The researchers' description of historical industry evolution suggests that changes in themeatpacking industry have resulted from technological change and dynamic rivalry between firms. The basic question addressed by this project was whether the evidence from Structure-Conduct-Performance and New Empirical Industrial Organization studies is persuasive enough to warrant the conclusion that competition in themeatpacking industry is deficient. Taken as a whole, the literature review led to the conclusion that the answer is no". "Many SCP studies indicated the existence and exercise of market power. However, the failure to use appropriate theoretical models of conduct in these studies makes industry generalizations questionable". "The NEIO studies show a persistent gap between the actual price of livestock and the competitively determined price predicted by theory. However, the studies have not incorporated sufficient detail to prove noncompetitive behavior". (United States Department of Agriculture, Concentration in the Redmeatpacking Industry. Packers and Stockyards Programs, Grain Inspection Packers and Stockyards Administration. February 1996. pp. 54 and 55.) Conclusion While research thus far has not found that concentration negatively affects prices paid for livestock, several research questions have not been adequately addressed. In addition, significant structural changes are occurring that warrant assessment of competitive implications. The Department is conducting additional research on the effects of concentration and forward contracting in meatpacking. These issues are complex, dynamic, and involve many tradeoffs but additional research can yield further insights. END_OF_FILE