Trends . . .  CATTLE  ON   FEED  NUMBERS  DOWN  FROM  ‘07

On Friday (December 19^th), USDA-NASS released the December 1 Cattle on Feed report which was similar to pre-report expectations and followed the trends of recent months.  As of December 1, 2008, the number of cattle on-feed totaled 11.3 million head; that was 6 percent below a year ago and 5 percent below 2006’s.  Of note, the December 1 cattle on-feed number was the smallest reported since 2004.

LIVE  TO  CUTOUT  BEEF  SPREAD

The live to cutout spread is the difference between the purchase price of a slaughter animal and the wholesale value (cutout value) plus the byproduct value (total sum of all non-meat items).  Although this price spread provides an estimate for packer gross margins it does not represent packer profitability since it does not take into account direct and indirect costs (i.e. labor) incurred by packers.  Overall, 2008 had higher beef packer gross margins compared to 2007’s.  However, recent declines in wholesale beef and byproduct values began pressuring packer margins in late 2008.

TURKEY  HATCHERY

Most of the attention regarding the poultry industry this year has focused on the broiler sector, however, production cutbacks have also been occurring in the turkey industry.  The turkey industry has been struggling to maintain profit margins, just like the chicken sector.  Turkey producers have been pressured by high feed costs as well as economic slowdowns in the domestic and foreign markets.  In response, the turkey industry began to initiate modest cutbacks in the hatchery flock late in the second quarter of 2008.  As the year has progressed, so did the efforts by the industry to reduce production as turkey eggs placed in incubators and poults placed have continued to decline.