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United States Department of Agriculture - Economic Research Service - The Economics of Food, Farming,
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Briefing Room
agricultural baseline projections:
u.s. livestock, 2004-2013

Livestock sector projections initially reflect stronger meat animal prices in 2003, largely due to very tight beef supplies, particularly of high-quality beef. Total meat production falls in 2004 in the baseline, assuming normal moisture conditions, largely because of lower beef production due to already-reduced cattle inventories and the rebuilding of the cattle herd.

In the longer run, a combination of high cattle prices and rising hog and broiler prices, gains in production efficiency, and only moderate increases in feed prices encourage growth in total meat production. Poultry use becomes a larger proportion of total meat consumption in the projections. Meat exports benefit from stronger foreign economic growth.


Livestock inventories and broiler production

Beef production declines in the near term as producers retain cows and heifers for expansion. Cattle herds are expected to increase somewhat from cyclical lows near 95 million head in 2004-05. Rising slaughter weights augment gradual herd expansion over the remainder of the projections. Pork production grows slowly, as the more coordinated/integrated industrial structure dampens the U.S. hog cycle. Poultry production continues to rise, but at a lower rate than during the 1980s and 1990s due to the maturity of the domestic sector and slower export growth.

The trend toward larger and more commercialized livestock systems continues throughout the baseline period; efficiency gains allow production to expand while real prices generally decline.

  • Vertical coordination increases in the beef sector as strong demand for higher quality beef continues, particularly for the export and hotel and restaurant markets, but increasingly also at retail.

  • The increase in efficiency of the U.S. hog breeding herd over the last 5 to 10 years reflects a shift to larger, more efficient operations and the decline in smaller, less efficient operations. For the baseline, the increase in efficiency slows somewhat since larger, more efficient operations (those with more than 5,000 head) now account for three-fourths of the U.S. pig crop.

  • Production coordination and market integration between the United States and Canada increase in the hog sector. Feeder pigs produced in Canada are finished and processed in the United States, where feed grain prices remain favorable and processing costs are lower. Large North American retailers and hotels, restaurants, and institutions source pork cuts where prices are attractive, with demand accommodated by trade between the countries.

  • The poultry sector has benefited from economies of scale associated with the industry's horizontal and vertical integration. Projected gains in efficiency over the next decade are smaller than in the past 25 years.

Nominal livestock prices

Hog and broiler prices increase moderately in response to growing domestic market demand coupled with export gains. Projected price increases are slower than the general inflation rate. Cattle prices decline in the projections from record high levels.

Percent of U.S. income spent on meat

U.S. consumers buy more meat but use a smaller proportion of disposable income for these purchases, continuing a long-term trend. Over the next 10 years, consumer meat expenditures decline from about 1.8 percent to 1.4 percent of disposable income.

  • The trend continues of poultry expenditures rising as a share of consumer spending on meats.

Per capita meat consumption

Total per capita meat consumption (boneless-weight basis) declines from about 185 pounds in 2003 to near 181 pounds, before rising back to 185 pounds at the end of the projection period.

  • Per capita consumption of relatively lower priced poultry increases throughout the baseline, allowing poultry to gain a larger share of total meat consumption and meat expenditures.

  • Per capita consumption of beef initially declines, but then stabilizes later in the projections, while pork consumption varies between 48 and 50 pounds per person.

U.S. meat exports

U.S. meat exports rise throughout the baseline period, reflecting improved global economic growth and rising demand for meats. U.S. imports of beef and cattle from Canada recover from reduced levels in 2003, which followed the discovery of BSE in Canada. (Baseline projections were completed prior to the diagnosis of a case of BSE in an adult Holstein cow in Washington State in December 2003.)

Beef

  • The United States, which imports grass-fed beef from Australia and New Zealand, becomes a net beef exporter in the latter part of the projections as cattle inventories rise and exports of high-quality fed beef exceed imports of lower quality processing beef.

  • The United States remains the primary source of high-quality fed beef for export, largely to Pacific Rim nations.

Pork

  • Pacific Rim nations and Mexico remain key markets for long-term growth of U.S. pork exports. Canada continues to be a strong competitor for pork trade in these markets. Brazil also is a major pork exporter, competing with the United States, Canada, and the European Union in international markets.

  • While increased efficiency in pork production helps limit production costs, longer term gains in U.S. pork exports will be determined by costs of production and environmental regulations relative to competitors. Such costs tend to be lower in countries with growing pork industries, such as Brazil and Mexico.

Poultry

  • U.S. broiler export growth is expected to slow from the rate of the 1990s. U.S. producers will face strong competition from other major broiler exporting countries, particularly Brazil and Thailand.

  • Major U.S. export markets include Asia, Russia, Eastern Europe, and Mexico. Growth in U.S. poultry exports to Russia is not expected to return to the pace of the last decade, reflecting higher production in Russia, greater competition in that market, and current import quotas which are assumed to continue through early 2006.

Farm value of domestically produced meat

While U.S. meat exports grow in importance, the domestic market remains the dominant source of demand. Meat exports account for about 11 percent of the total value of domestically produced meat in 2003, growing to more than 12 percent in the second half of the projections.

Milk production and dairy herd

Farm milk prices during the next several years are expected to recover from recent low levels. Growth in milk production is projected to slow through 2005/06 because of the recent low prices and the loss of payments under Milk Income Loss Contracts after the 2004/05 marketing year. Meanwhile, demand for dairy products is expected to recover from its recent slump.

  • Management and productivity gains are expected to boost milk output. Further development of large, specialized operations in many regions will be a significant contributor to these gains.

  • Milk per cow is projected to continue to grow, while cow numbers decline. However, the rates of change may well be slower than in the past as milk per cow is less easily boosted by simply increasing the amount of concentrate feeds fed. Also, increasing specialization of dairy farms over time (and the associated specialized nature of dairy capital and other inputs) probably has made exit from milk production more sluggish than in past decades.

  • Domestic dairy use grows slowly throughout the baseline period, slightly faster than the growth in population. Cheese and butter demand will benefit from greater consumption of prepared foods and increased away-from-home eating. Per capita consumption of fluid milk, however, is projected to shrink slowly.

  • Following the near-term price adjustments, real farm milk prices are projected to decline slowly in the long run.

Other topics in the online baseline presentation:

for more information, contact: Paul Westcott or Edwin Young
web administration: webadmin@ers.usda.gov
page updated: February 6, 2004

Briefing room front page

Summary of projections

Macroeconomic assumptions

U.S. crops

U.S. livestock

U.S. agricultural sector measures

Global agricultural trade

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