Tight margins and lower grain prices are encouraging cattle feeders to feed to heavier weights, helping offset lower numbers of cattle available for feeding and slaughter, according to the latest Livestock, Dairy and Poultry Outlook report from the USDA. At the same time, improved forage conditions appear to be encouraging ranchers to retain more heifers for breeding, which could further reduce supplies of feeder cattle in the near term.

Milk prices, meanwhile, are dropping, which could result in a pickup in culling of dairy cows. The average all-milk price for 2014 was a record high of $23.97 per hundredweight, up 19.6 percent from the 2013 price of $20.05 per hundredweight. But for 2015, USDA now projects an average all-milk price of  $17.75 to $18.55 per hundredweight, down from last month's forecast of $18.45 to $19.25.

Pork will become more competitively priced as the U.S. industry rebounds from the effects of Porcine Epidemic Diarrhea. USDA reports producers have increased breeding inventory increases express strong farrowing intentions, suggesting higher pork production and lower hog prices in 2015. Hog prices are expected to average $60 to $65 per hundredweight this year, almost 18 percent below prices in 2014.

Other key points in the report include:

  • Drought continues in the Southern Plains and Southwestern United States, although its intensity has abated somewhat. The U.S. Drought Monitor, released December 30, 2014, showed an improved situation for cattle country compared with last month.
  • Despite continuing drought, the limited precipitation has allowed wheat pasture to remain in relatively good condition, providing some opportunity for weight gains in feeder cattle being pastured on Southern Plains wheat.
  • Placements in 1,000-plus-head feedlots during November dropped 4 percent below 2013. November placements were the lowest and marketings were the second lowest for the month since the series began in 1996.
  • Any significant retention of heifers for rebuilding the cow herd would offset increases in beef production due to heavier slaughter weights. However, cow-calf operators face significant incentives to sell heifers as feeder cattle sooner rather than waiting for income from their calves at least two years later.
  • Commercial red meat production for the United States in November 2014 was down 9 percent compared with November 2013. Further, Livestock Slaughter showed a 10-percent drop in commercial beef production through the month of November 2014 compared with this time last year.
  • Average live weights of commercial cattle continue higher than last November, up by 24 pounds. Since September 2014, 5-Area Fed Steer live weights have consistently exceeded 1,420 pounds.
  • November 2014’s All-fresh beef retail value was $5.98 per pound, up nearly a dollar from a year earlier. Estimated average monthly Choice retail beef prices for January 2014 through November 2014 were $5.97 per pound, 13 percent above the same-period average of $5.28 for 2013.
  • For 2015, average annual retail beef prices are expected to be slightly higher than they were in 2014. Recent drops in gas prices have given some indication of additional spending power at the grocery store. Larger supplies of pork and poultry may limit beef price increases this year.

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