US – The latest USDA WASDE forecasts contained some downward revisions for the 2017 supply outlook while making some modest upward revisions to 2018, according to Steiner Consulting Group, DLR Division, Inc.
The WASDE report is closely followed and, in our experience, the best publicly available commodity outlook report in the world. While the European Commission over the years has made a concerted effort to provide more consistent and timely outlook reports, we think still cannot match the breadth and timeliness of the USDA analysis.
For readers that are interested in this sort of stuff we would also suggest the quarterly outlook that ABARE in Australia puts together. A few points on this latest USDA update:
Beef production for 2017 is now forecast at 26.372 billion pounds, 95 million pounds less than the November projection but still about 1.1 billion pounds (+4.3 per cent) higher than in 2016. The following chart shows the progression of the USDA 2017 forecasts since May.
Interestingly, the current projection for 2017 is pretty close to what was forecast back in May. But even as the 2017 beef production forecast has been revised lower in the second half of 2017, USDA has actually steadily increased its projections for 2018 production.
This is likely a function of expectations for more cattle expected to be available next year and a trend increase in carcass weights. Cattle weights have been notably under year ago for much of this year and this has limited the supply of beef coming to market.
USDA now forecasts beef production in 2018 to be 27.657 billion pounds, a 1.3 billion pound increase (+4.9 per cent) higher compared to 2017. Back in May, USDA was projecting 2018 beef output to increase 2.3 per cent year-on-year.
Despite the widening gap between 2017 and 2018 beef production forecasts, USDA has made only minor revisions to price expectations in the last few months. Back in May, USDA forecast 2017 steer prices at $122.5/cwt (average of range) while 2018 prices were forecast at $118/cwt, 3.7 per cent lower.
The latest December forecast pegs the 2017 steer prices at 121.42/cwt while 2018 steer prices are forecast to average $117.5/cwt, 3.2 per cent lower. Following the price performance so far this year, clearly USDA is counting on solid demand next year as well.
Per capita beef consumption in 2018 is now forecast to be 59.1 pounds (retail basis) 3.7 per cent higher than in 2017. Last May, USDA was only projecting a 1.4 per cent increase in per capita consumption and yet projecting a bigger year-on-year decline in fed cattle prices.