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The Agricultural Newsletter
from the Federal Reserve Bank of Chicago
Number 1869

October 1995

AgLetter
MEAT PRODUCTION HEADED TO NEW HIGH
The growth in U.S. meat production slowed considerably this summer. Nevertheless, production for all
of this year will set another new high and some analysts
are projecting further growth for next year. The latest
U.S. Department of Agriculture forecast suggests that the
combined production of red meats and poultry this year
will reach 74.2 billion pounds, up 3.3 percent from last
year and the 13th consecutive annual rise. Next year ’s
increase is projected to be even larger. However, the
strong upward pressures on feed prices that have accompanied the various setbacks to this year ’s crop harvest
raise added uncertainties regarding the extended outlook for meat production.
The current USDA projections imply above-trend
growth rates for meat production again this year and
next. During the last twelve years of uninterrupted
growth, U.S. meat production rose at a compound annual
rate of 2.6 percent. Poultry dominated the overall uptrend, registering an annual growth rate of 5.6 percent.
The pattern for red meat production has been variable,
with several years of declines interspersed with years of
gains. For the entire twelve year period, however, red
meat production recorded a 1.1 percent compound annual
rate of growth. Of the two major red meats, the annual
growth rate for pork exceeded that for beef, 1.8 percent
versus 0.7 percent, respectively.
Despite having the most lackluster growth of the last
twelve years, beef has contributed significantly to the rise
in overall meat production in recent years. After posting a
strong 5.8 percent increase last year, the year-over-year rise
in beef production through the first nine months of this
year continued above trend with a gain of 3.4 percent.
Pork production rose 3.6 percent last year and then posted
a year-over-year gain of 5.5 percent during the first half of
this year. Since then, however, pork production has
dropped below the year ago pace, a trend likely to continue
well into next year. Poultry production rose 6.5 percent last
year and posted even larger gains through the first half of
this year. As was the case for pork, however, the pace in

poultry production slowed considerably this summer. Preliminary tallies show third-quarter poultry production
barely exceeded the year-ago pace.
While some slowing in the rate of gain in pork and
poultry production had been anticipated for the summer
quarter, the cut-back that did occur was considerably
more than had generally been expected. In retrospect,
the unusually warm summer temperatures probably contributed to the slowing. In addition to higher death losses, the warm temperatures also resulted in slower weight
gains. Consequently, the number of hogs, broilers, and
turkeys that were shipped to processing plants fell short
of expectations. Moreover, the weights of those that were
processed dropped below year-ago levels, reversing the
first half trend.
Despite the slower rise, third quarter production
of all meats remained above the year-ago level. And
through September, total meat production this year was
up 3.8 percent. The increased output coincided with
fairly strong consumption patterns, both domestically
and especially in shipments abroad. Modest gains in
employment, a somewhat lower unemployment rate,

U.S. meat production
billions pounds*
80

60

Other red meat
Poultry

40

Pork
20

Beef
0
1971

’74

’77

’80

’83

’86

’89

*Carcass weight for red meats and ready-to-cook weight for poultry.
**Projected.
Source: U.S. Department of Agriculture.

’92

’95**

where between $2.75 and $3.15 during the year that started in September. The low end of the projected range
would imply the highest corn prices since 1983/84 and
the midpoint of the range would imply a 30 percent increase from the average of the past year.

U.S. may become net exporter of pork in 1995
million pounds, carcass weight basis
1,200

Imports

800

400

Exports
0
1971

’74

’77

’80

’83

’86

’89

’92

’95*

*USDA projection.
Source: U.S. Department of Agriculture.

and an increase in disposable income have helped to sustain commercial food expenditures this year while offsetting a leveling-off in food assistance programs. Lower
retail meat prices have also helped to encourage domestic
consumption patterns. The strength in demand is even
more evident in export markets. During the first seven
months of this year, broiler exports were up more than 40
percent from last year’s strong pace while turkey exports
were up more than 20 percent. Pork exports were up 70
percent while beef and veal exports were up more than a
tenth. The gains in meat exports may moderate in the
second half. Nevertheless, 1995 could mark a watershed
year in several respects for U.S. trade in meats. For instance, on a carcass weight basis, the U.S. may become a
net exporter of pork this year. And broiler exports in 1995
may absorb 15 percent of production, up from 12 percent
last year and less than 5 percent as recently as 1989.
Meat supplies in the months ahead will reflect the
inventory of animals already in the production pipeline
and the responses of producers to actual and anticipated
profit margins. Price relationships have translated into
positive returns for most hogs marketed since mid-year.
Alternatively, feedlot operators have suffered losses on
most cattle marketed since early spring. The pattern last
fall and winter was reversed, with large losses hitting
most hog farmers while returns to feedlot operators were
generally positive, according to Iowa State University analysts. Recent sharp increases in feed costs, due largely to
the weather-related problems afflicting the 1995 crop harvest, are starting to exert considerable influence on future
prospective returns to livestock producers. This may
damp some of the gains analysts were projecting for meat
production next year. Corn prices have recently moved
above $3 per bushel and are projected to average some-

The latest evidence of pipeline inventories of cattle
and hogs imply that pork production will continue to lag
year-ago levels during the fall and winter months while
beef production will continue to register gains. The scaling-back in hog production that began earlier this year
(mostly as a result of depressed prices last fall) continued
through the summer months. As a result, the number of
hogs on U.S. farms remains below the year-ago level. The
number of hogs held for breeding purposes is down the
most, in excess of 4.5 percent. The September 1 inventory
of hogs intended for market is down a little over 1.5 percent from a year ago but up 4 percent from two years ago.
The trend in hog numbers in each of the five states
of the Seventh Federal Reserve District parallel those nationwide. In Iowa, by far the largest hog producing state,
the number of hogs held for breeding purposes is down 9
percent from a year ago while the number of hogs intended for market is down 5 percent. Among the other four
District states, hogs held for breeding purposes numbered 8 percent less than a year ago while market hogs
numbered 9 percent fewer. The largest declines for both
classifications of hogs were in Wisconsin. Michigan recorded the smallest cuts.
As an aside, the September 1 inventory of all hogs
in District states was down nearly 7 percent and the lowest for that date in at least eight years. Reflecting rapid
growth in a handful of other states, hog numbers elsewhere were up 2 percent and the largest in at least eight
years. With the accelerated restructuring in hog production that has occurred in recent years, the District states’
share of all hogs on U.S. farms has retreated from 49 percent in the early 1990s to just over 43.5 percent in the
most recent survey.
Despite the reduction in the number of hogs held
for breeding purposes, producers reportedly intend to
farrow just as many sows during the fall and winter
months as was the case last year. The trend toward more
intensive use of the breeding stock has been a characteristic of the restructuring in hog production in recent years.
However, many analysts are skeptical that the smaller inventory of breeding stock will sustain sow farrowings at
last year’s levels. This skepticism is supported by reports
of low conception rates during the hot summer months
and by the recent surge in feed costs.

The latest inventory estimates for cattle show some
signs of moderating gains. A mid-year survey found that
the number of beef cows was up a relatively large 3.3 percent from last year, strengthening the likelihood that this
year’s calf crop will register another sizable increase. Alternatively, the number of heifers being held for replacements to the beef cow herd was estimated to be down 3.4
percent. This could be an early sign that the cyclical upswing in the beef cow herd that began in late 1990 could
end next year. Further signs of moderating gains are also
evident in the latest estimates of the number of cattle in
feedlots. As of mid-year, feedlots held nearly 5 percent
more cattle than was the case a year ago. Since then the
movement of young cattle into feedlots has turned down
from last year’s pace while the marketings of fat cattle out
of feedlots has registered sustained increases. Accordingly,
the year-over-year gain in the inventory of cattle in feedlots
in the 13 major cattle feeding states on October 1 had narrowed to just over 1.5 percent. Feedlot inventories in the
two District states included in that 13 state total—Illlinois
and Iowa— were unchanged from a year ago.
Based on the current inventory estimates, it would
appear that pork production will be up seasonally this fall
but down perhaps 3 to 4 percent from a year ago. The early months of 1996 will bring seasonally smaller pork supplies but the year-over-year decline may narrow slightly.
Based on producers’ farrowing intentions, pork production
could return to the year-ago level by next spring and move
well above this year’s level by next summer.
USDA analysts expect continued growth in beef
and poultry production will lead to record meat supplies
this fall and throughout next year. Year-over-year gains
in quarterly beef production through next summer are
forecast to range from 2 to 4 percent. Poultry production
through mid 1996 is projected to range 5 to 6 percent
above year-ago levels and be followed by an even larger
gain next summer. However, unexpectedly high feed
prices may trim these projected gains.
The recent trend in livestock prices has varied
widely, with cattle prices generally quite weak and hog
prices registering a surprisingly strong recovery from abnormally low year-ago levels. During the fourth quarter
of last year, hog prices averaged only $31 per hundredweight, the lowest for any quarter since the spring of
1980. Prices recovered to the mid-to upper-$30s range
during most of the first half of this year and then soared
to a third quarter average of $48.75. The recent strength
in hog prices is somewhat surprising given the rather

Hog prices
dollars per cwt.
65

1989-93 range
55

45

1995
35

1994
25
Jan.

Mar.

May

July

Sept.

Nov.

Note: October 1995 figure is preliminary.
Source: U.S. Department of Agriculture.

modest decline in pork production this summer and the
continuing pattern of record production of all meats. The
increase may partially stem from the strong performance
in pork exports and a sizable expansion in pork processing capacity this year which may have contributed to
more aggressive packer bids. Even so, the current structure in futures prices imply strong hog markets through
next year. Recent transactions in hog futures contracts for
all delivery months have ranged from the mid $40s to the
low $50s per hundredweight. These price projections
would seem to be high relative to the meat production
forecasts of USDA analysts. Alternatively, the futures
prices may reflect a view that pork and total meat production will fall short of the USDA forecasts.
Gary L. Benjamin

AgLetter (ISSN 1080-8639) is published monthly by the Research
Department of the Federal Reserve Bank of Chicago. It is prepared by
Gary L. Benjamin, economic adviser and vice president, Mike A. Singer,
economist, and members of the Bank’s Research Department, and is
distributed free of charge by the Bank’s Public Information Center. The
information used in the preparation of this publication is obtained from
sources considered reliable, but its use does not constitute an endorsement of its accuracy or intent by the Federal Reserve Bank of Chicago.
To subscribe, please write or telephone:
Public Information Center
Federal Reserve Bank of Chicago
P.O. Box 834
Chicago, IL 60690-0834
Tel. no. 312-322-5111

SELECTED AGRICULTURAL ECONOMIC INDICATORS

Percent change from
Latest
period

Value

Prior
period

Year
ago

Two years
ago

Prices received by farmers (index, 1990–92=100)
Crops (index, 1990–92=100)
Corn ($ per bu.)
Hay ($ per ton)
Soybeans ($ per bu.)
Wheat ($ per bu.)
Livestock and products (index, 1990–92=100)
Barrows and gilts ($ per cwt.)
Steers and heifers ($ per cwt.)
Milk ($ per cwt.)
Eggs (¢ per doz.)

September
September
September
September
September
September
September
September
September
September
September

105
116
2.73
80.30
5.92
4.42
93
49.10
61.30
12.70
66.6

2.9
2.7
3.8
–1.0
1.5
4.0
1.1
–1.0
–0.6
2.4
4.7

8
14
25
–2
8
24
2
36
–7
–1
10

3
10
24
–2
–5
43
–7
1
–18
–1
20

Consumer prices (index, 1982–84=100)
Food

September
September

153
149

0.2
0.3

3
3

6
6

September 1
September 1
September 1
September
September
September

1,558
335
1,881
2.21
1.44
10.8

N.A.
N.A.
N.A.
–4.2
–4.3
–3.0

83
60
–9
4
–7
1

–26
15
–12
9
0
N.A.

Receipts from farm marketings (mil. dol.)
Crops**
Livestock
Government payments

June
June
June
June

13,162
6,313
6,685
164

–5.0
5.7
–8.5
–71.1

5
15
–2
–33

5
23
–5
–55

Agricultural exports (mil. dol.)
Corn (mil. bu.)
Soybeans (mil. bu.)
Wheat (mil. bu.)

July
July
July
July

3,966
192
41
94

0.0
14.5
16.1
15.4

26
106
142
28

29
110
–3
–13

Farm machinery sales (units)
Tractors, over 40 HP
40 to 100 HP
100 HP or more
Combines

September
September
September
September

4,577
3,230
1,347
879

7.2
2.7
19.7
17.8

–9
6
–31
13

15
17
10
16

Production or stocks
Corn stocks (mil. bu.)
Soybean stocks (mil. bu.)
Wheat stocks (mil. bu.)
Beef production (bil. lb.)
Pork production (bil. lb.)
Milk production* (bil. lb.)

N.A. Not applicable
*22 selected states.
**Includes net CCC loans.
AgLetter is printed on recycled paper
using soy-based inks

Federal Reserve Bank of Chicago
Public Information Center
P.O. Box 834
Chicago, Illinois 60690-0834
312-322-5111

AgLetter

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