Market Briefs | Feb. 15, 2023

Livestock and Poultry
In the latest USDA Supply/Demand report, the 2023 beef production forecast was raised from last month’s report. Higher slaughter estimates for the first quarter were partially offset by lower carcass weights as cow slaughter was larger than previously forecast. For the second quarter, steer and heifer slaughter was lowered as fourth-quarter placements were lower than expected, implying fewer animals available for marketing in the second quarter. Lower fed cattle slaughter, coupled with lower average carcass weights, more than offset expected cow slaughter. Pork production was lowered on slightly lighter first-half carcass weights. Broiler production is reduced for the first three quarters based on recent hatchery data and the current pace of slaughter. Egg production was reduced slightly on recent layer flock data and slower-than-expected production growth in December 2022. 

Beef imports for 2023 were raised for the year with higher first-quarter forecast partially offset by lower second-quarter imports. The beef export forecast and the pork trade projections were unchanged. Broiler imports and turkey exports were lowered, while egg imports were projected higher. 

Expected cattle prices for 2023 were raised on expected strength in demand for fed cattle as feedlot numbers shrink. U.S. ranchers have the smallest cattle herd in over 60 years, and that is reflected in the report. Hog and broiler price estimates were lowered, reflecting current prices. Egg price estimates were raised, also reflecting current prices.

The USDA Supply/Demand report showed expectations for declining milk production as weaker milk prices are expected to result in lower cow inventories. The Jan. 1 cattle inventory report showed a dairy cow inventory only fractionally higher than last year, and that producers were retaining 2% fewer cows for the dairy herd. Imports for 2023 are expected to increase and exports are expected to decrease. Both Class III and Class IV prices were lowered from the previous report, reflecting lower product price forecasts, and the all-milk price was reduced to 20.70 per cwt.

March corn futures continue to chop along in a mostly sideways pattern below resistance at the recent high of $6.88 and support near $6.70. There is currently an adequate flow of corn coming to market, and that is reflected in weaker basis levels. Argentina has seen significant corn crop losses, but they are mostly built into prices at this level. The market will soon be focused on the size of the U.S. crop. USDA will release its  initial estimates at the annual Outlook Forum at the end of February.

The National Cotton Council released the results of its 2023 grower survey, which revealed that farmers intend to plant 11.2 million acres of upland cotton. That’s down 17.3% from 2022. Extra-long staple intended acres were pegged at 184,000, which is a fractional increase over last year. Cotton prices are significantly lower than last year, while other commodity prices have remained more stable. The price of cotton relative to other commodities has resulted in farmers choosing to plant other crops. Arkansas farmers reported planting intentions that are down 17.7% from last year. March cotton remains in a mostly sideways trading pattern below 90¢, while new crop December has resistance at 87¢. The market continues to face uncertain demand, especially given the fraught relationship between the U.S. and China.

In the February supply/demand report, USDA lowered total rice imports by 3 million cwt to 42 million. If realized, that would set a record for imports. The export forecast was lowered 4 million cwt to 62 million, the lowest level since 85/86, reflecting both the smallest supply in 20 years and limited exports due to high U.S. prices. Projected all rice ending stocks were increased one million cwt to 33.1 million, which is down 17% from the previous year. The southern long grain average on farm price was raised 20¢ to $16.90.

Old-crop soybean futures are technically trending higher, but aren’t challenging contract highs. The monthly supply/demand report showed expectations for lower crush and higher ending stocks. Crush is now pegged at 2.23 billion bushels, down 15 million from last month. Exports were unchanged, so the 15 million bushels carried over directly into ending stocks, which are now pegged at 225 million bushels. The season average price was up 10¢ from last month to $14.30/bushel.