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LIVESTOCK SITUATION AND OUTLOOK

Beef Production Record-Large In 2000

(December 27, 2000) The beef sector shows little hint that heifer retention and herd expansion is near. However, the base for future production has been eroded. Although cattle prices have risen sharply in 2000, broad-based drought again resulted in large numbers of heifers being placed on feed. Beef production in 2000 is forecast record-large and up over 1 percent from the 1999 record. Cattle slaughter was up only marginally from 1999, but slaughter weights continue the rapid upward spiral, averaging up another 9 pounds. At least part of the rise is due to reduced beef cow slaughter. Steer and bull-stag slaughter was about unchanged from a year earlier, however, all other slaughter classes rose over year-earlier levels. Steer slaughter remained near the largest levels since 1995. Heifer slaughter is forecast up about 2 percent and was the second largest on record. The record 12.161 million heifers was set in 1976, when the cattle inventory was nearly one-third larger. Dairy cow slaughter will likely be up 3 to 4 percent as inventory adjustments began. Beef cow slaughter is projected down about 7 percent, the fourth year of decline as the sector attempts to maintain its base for future production. In sharp contrast to the heifer slaughter, beef cow slaughter peaked in 1975 at more than double the 2000 level.

Cattle on feed inventories continue to decline as marketings remain large and feedlot placements fall in line with declining cattle inventories and improvement in moisture conditions in most areas. Cattle on feed inventories on December 1 were up 2 percent from a year earlier, but placements during November were down 8 percent, marking the third month of year-to-year declines. Smaller movements of stocker-feeder cattle following drought induced early movement, and placement of these cattle will result in reduced feedlot placements for the next couple of years, regardless of how anemic heifer retention may be in 2001. The more favorable grazing conditions are, the more strength will be added to heifer retention. For the past couple of years heifers were retained, but were forced into feedlots due to poor conditions. Most of the heifers from the 2000 calf crop have already moved as cattlemen concentrated on maintaining the cow herd under severe drought conditions.

Hog Prices Rally

Hog prices in December have rallied from $38 per cwt to the low $40' s in December as slaughter rates have lagged behind early expectations. Severe winter storms in the north central states are contributing to the lower slaughter. With the winter storms and the typical reduced slaughter weeks due to the holidays, slaughter rates in early 2001 will likely exceed early expectations and pressure hog prices. The December Hogs and Pigs report to be issued on December 28 will provide additional information on hog inventories and producers' farrowing intentions.

December 27, 2000

Economic Research Service

USDA, Washington, D.C.

202-219-0515

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