Ldp m february 2013

Livestock, Dairy, and
LDP-M-224

Feb 14, 2013
Poultry Outlook
Rachel J. Johnson
rjohnson@ers.usda.gov

Cattle Herd Rebuilding Thrown a Curve, Drought To
Determine Inventory Dynamics in 2013

Contents Beef/Cattle: Drought has continued through early February 2013. In the aftermath of
Beef/Cattle more than 2 years of drought, pasture development and feed markets in 2013 will be
Beef/Cattle Trade particularly sensitive to weather uncertainties, especially through the second and third
Pork/Hogs quarters of 2013 as crops and pastures develop. Pasture development will be a focus of
Poultry concern, especially for beef cattle producers, particularly cow-calf and stocker
Poultry Trade operations, and will determine when cow herd rebuilding will begin. It will also affect
Sheep/Lamb the timing of placements of feeder cattle in feedlots.
Dairy
Contacts and Link Beef/Cattle Trade U.S. beef exports for 2012 totaled 2.45 billion pounds, 12 percent
lower than in 2011. Beef imports totaled 2.2 billion pounds, or nearly 8 percent higher
Tables
Red Meat and Poultry than in 2011. Cattle imports from Canada and Mexico were 15 and 3 percent higher,
Dairy Forecast respectively, year over year.

Web Sites Pork/Hogs: U.S. pork exports in December, at 426 million pounds, were almost 14
Animal Production and percent below a year ago. Exports thus finished 2012 at 5.4 billion pounds, 3.7 percent
Marketing Issues above those of 2011. The top three foreign destinations for U.S. pork in 2012 were
Cattle Japan, Mexico, and ChinaHong Kong.
Dairy
Hogs
Poultry: Broiler meat production in 2012 totaled 37.0 billion pounds, down 0.4
Poultry and Eggs
WASDE percent from the previous year. The outlook for 2013 is for a slight increase in
-------------- production during the first three quarters and rising production in the fourth
Tables will be released quarter, totaling 37.3 billion pounds. Turkey meat production in 2013 is forecast
on Feb 26, 2013 at 6 billion pounds, up 1 percent from 2012. Turkey meat production is expected
The next newsletter
to decline slightly in second-quarter 2013 but increase in the remaining three
release is Mar 14, 2013 quarters. Table egg production is expected to increase slightly (1.3 percent) in
-------------- 2013, reaching 6.78 billion dozen, up from 6.7 billion dozen in 2012.
Approved by the
World Agricultural
Outlook Board.

Poultry Trade: December broiler and egg shipments were both up from a year earlier, while turkey shipments were
down. Broiler shipments totaled 607.1 million pounds, a 4-percent increase from last December’s shipments. Egg
shipments were up 19 percent from a year ago, totaling 25.7 million dozen. Turkey shipments totaled 63.5 million
pounds, an 11-percent decline from a year ago. The 2012 fourth-quarter broiler shipments registered as the fourth
largest ever, while turkey and egg shipments were the largest shipments on record.

Sheep/Lamb: The sheep inventory registered a smaller decline than in the previous 2 years. Despite the drought
conditions in most of the sheep-producing areas, the “grow our flock” program by the sheep industry appeared to
slow the decline. The NASS Sheep and Goats report estimated the inventory of all sheep and lamb in the United
States on January 1, 2013 as 5.34 million head, down 1 percent and a 30,000-head decline from 2012. Breeding
sheep inventory decreased to 3.98 million head on January 1, 2013, down 1 percent from 4.0 million head on
January 1, 2012. A 2-percent decline was seen in the 2012 lamb crop and is expected to result in further production
declines during 2013, with production at around 152 million pounds. As a result, slaughter lamb prices, which
declined significantly in 2012, are expected to show strength in 2013 and average around $104-$111 per
hundredweight.

Dairy: Milk supplies will increase fractionally in 2013 as continued yield improvements offset herd declines. An
improved feed outlook supports feeding rates and moderates the herd decline. Prices remain steady in light of a
largely unchanged export forecast.

2
Livestock, Dairy, & Poultry Outlook/LDP-M-224/February 14, 2013
Economic Research Service, USDA

Beef/Cattle

The Incredible Shrinking Cow Inventories

Since 2010, drought has reduced pasture availability, forcing cows to slaughter,
feeder cattle out of Mexico, and feeder cattle into feedlots prematurely. The
drought has also resulted in successively smaller calf crops. Since one year’s calf
crop is the bulk of the next year’s supplies of feeder calves and, subsequently, of
fed cattle, smaller calf crops translate into successive reductions in expected annual
beef production.

Inventories of all cattle and calves of 89.3 million head on January 1, 2013 reached
their lowest level since 1952, when the January 1 inventory of all cattle and calves
was 88.1 million head. The January 1, 2013 inventory of beef cows was 29.3
million, the lowest since 28 million in 1962. Total commercial cow slaughter in
2011 and 2012 proceeded at 17 and 16.6 percent of January 1 total cow
inventories—well above the more typical rates of 12 to 15 percent of January 1 cow
inventories. This rate of cow slaughter, combined with a smaller percentage of
heifers entering the beef cow herd, left the January 1, 2013 beef cow inventory 2.9
percent below the revised 2012 inventory. Beef replacement heifers were up, but
only by 1.9 percent over the revised 2012 inventory. This level of heifer retention
is not likely to lead to an increase in beef cow inventories in 2013.

Assuming normal weather patterns, producers are expected to begin retaining both
cows and heifers for breeding. As this happens, beef supplies will likely decline as
fewer cows are sent to slaughter and fewer heifers are placed in feedlots for beef
production. This is expected to accelerate over a period of several years until
enough heifers have been retained to increase feeder cattle supplies to levels that
will provide increased beef production.

A Bump in the Road for Cattle Inventory Dynamics

Current forecasts assume normal weather patterns in 2013—i.e., that the drought
will dissipate this year. As a result, stocker operators are expected to grow calves
on pasture rather than place them prematurely in feedlots. Normal growout of
feeder cattle on pasture during the spring and summer would allow stocker
operators and cattle feeders to spread placement of feeder cattle in feedlots more
uniformly over the year. Stocker operators and cattle feeders will have incentives
(higher anticipated prices and lower feeding costs) to place feeder cattle in feedlots
later in the year, especially in the fourth quarter of 2013, when expected lower
prices for corn and other feeds will follow from harvest of the 2013 crops. Cow-
calf producers are also expected to withhold heifers from feeder cattle supplies,
thereby reducing feeder cattle supplies that will support cattle and beef prices
during 2013. Beef production is expected to decline from 2012 levels.

However, as the drought has continued thus far into 2013, liquidation of cows has
remained relatively high. The cow slaughter may add to near-term beef supplies,
particularly of processing beef if forage supplies tighten. Feeder calves may
continue to be placed in feedlots earlier and at lighter weights than would be the
case if pasture conditions allowed them to be grown on pasture rather than on high-
priced corn.

3

Cattle-Feeding Technology Increasing Beef Supplies

Beef production, however, has not fully reflected changes in cattle numbers. While
declining slightly in 2011 and 2012, year over year, beef production received a
boost from the increased rates of cow slaughter, more imported cattle, and bigger
animals. Generally, dressed weights have increased about 4 pounds per year since
the 1970s. In 2012, average dressed weights for federally inspected steers and
heifers were 18 and 19 pounds heavier than in 2011, exceeding the average annual
trend of an increase in weights. These heavier steer and heifer weights were
partially a product of good feeding conditions during the year and the increased use
of beta agonists like ractopamine in cattle feeding. Ractopamine is fed toward the
end of the feeding period to increase lean muscle mass and reduce feeding costs.
, Texas Cargill meat packing plant in January of this However, the reduction in
feeding costs lasts only for a short period, after which feeding costs continue to
accrue with little or no additional weight gain. This narrows the window for
marketing fed cattle.

In the long run, closing of the Cargill meat packing plant in January of this year will
likely be a positive thing for the meat packing industry. However, while the closing
immediately raised packer capacity utilization rates, it also had an immediate—
although apparently short-lived—negative impact on fed cattle prices. Cattle
feeding margins have been negative since March 2011. With current feed and
feeder cattle price forecasts, margins are expected to remain negative until fourth-
quarter 2013, when fed cattle prices are expected to move above current forecasts of
breakeven costs of $136/cwt and expected prices for new-crop corn result in lower
feeding costs. With limited supplies of feeder cattle and possible over-capacity in
the cattle feeding sector, competition for feeder cattle could result in some
feedyard closures.

While fed cattle prices seem to have recovered for the most part from the abrupt
decline that followed the announcement of the Cargill plant closure, the current
price picture for the beef complex is not bright. Steer and heifer slaughter appears
to be flagging in the face of continuing negative margins for meat packers, and
wholesale cutout values have not recovered from their recent declines. This
deteriorating situation has likely been exacerbated by the continued economic
weakness. Retail beef demand will likely face continued price pressure as a result.

4

Beef/Cattle Trade

U.S. Beef Exports in 2012 Lower as U.S. Supply Tightens

U.S. beef exports for 2012 totaled 2.45 billion pounds, 12 percent lower than a year
earlier. The United States was still a net beef exporter in 2012, but by a narrower
margin—only 235 million pounds, versus 728 million pounds in 2011. With strong
global demand for U.S. beef, the tightening domestic beef supply and restrictive
high prices were the primary causes for lower exports in 2012. However, the United
States exported 9.5 percent of production, about 1 percent point lower than the
production share exported in 2011. Excluding Hong Kong and Russia, to which
U.S. exports were 24 and 5 percent higher, exports to all major beef trading partners
were lower in 2012. U.S. exports to South Korea and Japan were down by 20
percent and 1 percent, year over year; to Vietnam and Taiwan by 6 and 46 percent;
and to Canada and Mexico by 7 and 28 percent. Canada remained the top U.S. beef
export market in 2012 at 467 million pounds, followed closely by Japan at 450
million pounds. Mexico, South Korea, and Hong Kong rounded out the top 5 spots
at 352, 305, and 201 million pounds.

In terms of the U.S. export share to its major markets, Japan’s imports from the U.S.
increased by over 9 percent compared with a year earlier, with Australia the main
loser of market share to the United States. The United States lost market share in
Canada, however, to Australia and Uruguay, while total imports by Mexico were
lower from all major exporters to the country. Total imports by South Korea were
also lower, but Australia’s share of the market increased by over 2
percentage points.

U.S. beef exports in 2013 are expected to be only fractionally lower than in 2012.
Drought, slaughter cattle availability, and the extent to which U.S. producers
rebuild their herds will have the greatest effects on 2013 export levels. The U.S.
beef supply is perhaps the biggest constraining factor to growth in U.S. beef exports
in the near term.

U.S. Beef Imports Strengthen in 2012

U.S. beef imports in 2012 totaled 2.22 billion pounds, or nearly 8 percent higher
than in 2011. Imports were stronger year over year from Australia (+45 percent),
New Zealand (+8 percent), Mexico (+56 percent), and Uruguay (+39 percent).
Australia and Canada supplied the largest imports of beef to the United States, at
655 and 537 million pounds. Among the remaining top beef exporters were New
Zealand (495 million pounds), Mexico (242 million pounds), and, jointly, Central
American countries (Nicaragua, Costa Rica, and Honduras at 140 million pounds).
Previous years’ efforts at herd rebuilding in Australia and an expansion in that
country’s exportable supply of beef allowed for the strong year-over-year growth in
U.S. imports from Australia. Imports from Canada were constrained—22 percent
lower—due to tightened beef and lower cattle inventories. Exports by Mexico to all
destinations increased by 38 percent through November—a result of the country’s
initiative to become more competitive in the global beef market. Much of this
increase in Mexican beef exports was to the United States.

Expansion in the beef supply from Oceania is expected to continue in 2013, likely
raising U.S. import totals further. Imports from Mexico are expected to remain

5

strong this year, while imports from Canada are likely to strengthen. U.S. imports
for 2013 are forecast at 2.57 billion pounds, more than a 15-percent year-over-year
increase, making the United States again a net beef importer, although by a
close margin.

Cattle Imports Ratchet Higher in 2012

U.S. cattle imports in 2012 totaled just over 2.25 million head, or nearly 7 percent
higher than the previous year’s levels, with 35 percent of the total import share from
Canada and the remaining 65 percent from Mexico. Imports from Canada were 15
percent higher, year over year, and 3 percent higher from Mexico. Increases in
imports of Canadian cattle primarily stemmed from larger feeder and slaughter cow
imports, 55 percent higher for than in 2011. With tightening feeder cattle supplies,
demand was stronger for Canadian cattle. The U.S.-Canadian price spread for
heavier weight feeder cattle remained well above 2011 levels throughout much of
2012. For example, the U.S.-Canadian spread for 800-900 pound feeder cattle
(Nebraska vs. Alberta) averaged 10.51 USD per hundredweight (cwt) higher than in
2011 and spiked to over 24.00 USD/cwt higher in late spring 2012.

Despite an ever-tightening inventory of Mexican cattle, U.S. imports from Mexico
were higher again in 2012, making it the fourth consecutive year of higher imports.
These import levels, which are likely to be unsustainable, were driven in 2012 by
the continued effects of North American drought, which extended into major
Mexican cattle-exporting States. Coupled with record-high feeder prices in the
United States and intermittently languishing prices in Mexico, Mexican cattle
exports never lost the momentum that might have been expected given diminishing
supplies. Nevertheless, total U.S. cattle imports in 2013 are expected to be 13
percent below 2012, with decreases expected in exports from both North American
trading partners, given the relatively small calf crops in 2012.

6

U.S.-Canadian feeder cattle price differential (800-900 wt,
Nebraska vs. Alberta)

USD/CWT
30
20
10
25
20
11
20 20
12

15

10

5

0
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec

-5

Source: USDA, Agricultural Marketing Service.

Live Mexico City steer vs. Las Cruces feeder import price (500-600 lbs)

$U.S./CWT hd
180 250,000
160
140 200,000

120
150,000
100
80
100,000
60
40 Live steer, grass fed, wholesale, Mexico City 50,000
20 Imported 500-600 lb. feeders, Las Cruces
Mexican cattle imports
0 0

Sources: Sistema Nacional de Informacion de Mercados (SNIIM), USDA-ERS
Livestock & Meat International Trade Data http://www.ers.usda.gov/data-
products/livestock-meat-international-trade-data.aspx, and USDA- Agricultural
Marketing Service.

7

Pork/Hogs

2012 Exports Year Over Year Higher, but Lower in December

U.S. exports were 426 million pounds in December, almost 14 percent lower than a
year earlier. For the first time, Mexico was the largest foreign destination of U.S.
pork, but even so, shipments to Mexico were more than 10 percent below a year
earlier. Japan was—for the first time in recent memory—the second largest foreign
destination for U.S. pork products in December. Shipments to Japan were almost
21 percent below a year ago. Of the top five foreign destinations—Mexico, Japan,
ChinaHong Kong, Canada, and South Korea—only Canada and South Korea
purchased more U.S. pork in December.

For 2012, U.S. pork exports were almost 5.4 billion pounds, 3.7 percent above
2011. While Japan remained the largest foreign destination in 2012, shipments
were almost 7 percent lower than a year earlier. ChinaHong Kong, the third largest
foreign market in 2012, bought 4.4 percent less U.S. pork. Countries that boosted
the “bottom line” in 2012 were Mexico (+12 percent year-over-year, and the second
largest foreign destination in 2012), Canada (+17 percent, and the fourth largest
buyer in 2012), and Russia (+44 percent, and the sixth largest foreign market
in 2012.)

U.S. pork imports in December 2012 were 2.4 percent lower than a year earlier,
with imports from Canada accounting for most of the decline. For the year, the
United States imported almost 802 million pounds of pork, down just slightly (-0.22
percent) from 2011. In 2012, imports from Canada were 1.5 percent lower, while
shipments from Denmark declined by 7.2 percent. Canada accounted for 78 percent
of U.S. imports in 2012; about 9 percent were of Danish origin. These shares are
largely unchanged from 2011.

Live swine imports in 2012 totaled almost 5.7 million head, or 2.5 percent lower
than 2011. Only imports of breeding animals and 23-50 kg feeder pigs were above
a year earlier. More than 99 percent of U.S. swine imports were of Canadian origin
in 2012.

Top five foreign destinations for U.S. pork exports in December 2012

Rank Country Dec. 2012 Dec. 2011 Change yr.-over-yr.
million lbs. million lbs. %

World 426 493 -14

1 Mexico 104 116 -10
2 Japan 99 125 -21
3 ChinaHong Kong 56 107 -47
4 Canada 51 46 10
5 South Korea 47 37 26

Source: http://www.ers.usda.gov/data-products/livestock-meat-international-trade-data.aspx

8

Top five foreign destinations for U.S. pork exports in 2012

Rank Country 2012 2011 Change yr.-over-yr.
million lbs. million lbs. %

World 5,383 5,189 4

1 Japan 1,379 1,481 -7
2 Mexico 1,163 1,038 12
3 ChinaHong Kong 779 815 -4
4 Canada 587 502 17
5 South Korea 417 454 -8

Source: http://www.ers.usda.gov/data-products/livestock-meat-international-trade-data.aspx

9

Poultry

Broiler Meat Production Forecast at 37.3 Billion Pounds in 2013

The outlook for broiler meat production in 2013 is for a relatively small increase
compared with 2012. While there is still uncertainty about the course of feed prices
in the coming year, prices for a number of broiler products have been strengthening
and the forecast for exports is again strong. The number of chicks being placed for
growout currently has only been slightly higher than for the same period the
previous year. In 2013, most of the increase in broiler meat production is expected
to come from a larger number of birds slaughtered, but some added production will
come from higher bird weights at slaughter, especially during the first half of the
year. Broiler product demand is expected to be influenced by a gradually
improving domestic economy and strength in export demand.

For December 2012, broiler meat production was reported at 2.9 billion pounds,
fractionally lower than the same period in 2011. The number of birds slaughtered
in December decreased year- over- year by 2.4 percent. However, the sharp decline
in the slaughter rate was almost totally offset by a strong increase (up 2.2 percent)
in average bird liveweight at slaughter to 5.91 pounds.

The small decline in broiler meat production in December resulted in a fourth-
quarter 2012 total of 9.2 billion pounds, up 3.8 percent from fourth-quarter 2011.
This increase was the result of strong gains in meat production in October and
November, up 7.7 and 3.5 percent. In fourth-quarter 2012, the gain in meat
production was the result of both a higher number of birds slaughtered, due in part
to an extra day in the quarter, and higher average liveweights.

Broiler meat in cold storage at the end of December 2012 totaled 653 million
pounds, up 11 percent from the previous year and 30 million pounds more than at
the end of third-quarter 2012. Cold storage holdings rose during fourth-quarter
2012, partially due to strong gains in broiler meat production during that period,
although the increase was likely moderated by strong exports and strong demand.
With higher levels of broiler meat production forecast throughout 2013, cold
storage levels are expected to be higher during first-quarter 2013 and to have a
small gain in the second quarter. With continued strong exports and improving
domestic demand, cold storage levels are expected to fall below year-earlier levels
in the second half of 2013.

Cold storage holdings for specific broiler products had very mixed results at the end
of December, with a number of products showing a sharp decline from the previous
year while others showed a sharp increase. Products with declining cold storage
holdings included whole birds (21 percent), drumsticks (27 percent), and thighs (20
percent). Countering these declines were increases for leg quarters (22 percent),
legs (37 percent), thigh meat (23 percent), and wings (up 68 percent). Also pushing
up the cold storage holding of broiler products was a 9-percent increase in other
broiler products to 280 million pounds.

The level of cold storage holdings for the individual broiler products has been
reflected in the wholesale prices for only some of these products. The clearest
example is for whole birds, where lower cold storage holdings have been reflected
in higher prices. In January, prices for whole birds were over $1.01 per pound, up

10

considerably from a year earlier. Breast meat frozen stocks at the end of 2012 were
down slightly, and prices for boneless/skinless breast meat and bone-in breast meat
were both higher in January 2013 than in the previous year. One situation where
price changes have not reflected changes in cold storage holdings is for wings. In
January 2013, the average price for wings in the Northeast market was $2.06 per
pound, 12 percent higher than the previous year. However, going into 2013, cold
storage holdings for wings were 68 percent higher than the previous year.

With higher broiler meat production expected in the first half of 2013 and 10
percent higher cold storage holdings at the start of 2013, broiler prices in general
would be expected to be facing some downward pressure. This may be countered
by relatively high prices for competing meats, a growing economy, and a continued
strong market for broiler exports.

Turkey Meat Production Forecast for 2013 is 6 Billion Pounds

Turkey meat production in 2013 is forecast to total 6 billion pounds, up about 1
percent from 2012. The current forecast is an increase of 25 million pounds from
the January forecast. If realized, this would be the third year in a row that
production has increased. Turkey meat production is expected to be slightly lower
in the second quarter compared with the previous year, but this decline is expected
to be offset by gains in production in the other three quarters. The increased meat
production is expected to arise from a higher average liveweight at slaughter, as the
number of birds slaughtered is expected to remain very close to that in 2012.
Turkey producers, like other livestock producers, will continue to be influenced by
the uncertainty in the outlook for feed costs.

Turkeys slaughtered in 2012 numbered 250.2 million birds, 1.4 percent more than
the previous year. Turkey meat production rose by 3 percent to 6 billion pounds in
2012. The higher slaughter number was a major portion of the increase, but the
annual average liveweight at slaughter in 2012 was also higher at 29.8 pounds, an
increase of 1.4 percent from the previous year.

Turkey meat production in fourth-quarter 2012 was 1.5 billion pounds, 2.8 percent
more than in fourth-quarter 2011. The production increase during fourth-quarter
2012 was the result of higher average liveweights, which were 29.5 pounds for the
quarter. This offset a small decline in the number of turkeys slaughtered in fourth-
quarter 2012 (65 million) compared with the same period in 2011.

With one less slaughter day in December 2012 than in December 2011, turkey meat
production was down 3.8 percent to 442 million pounds. The one less day of
slaughter showed up most in the number of turkeys slaughtered in December (17.8
million, down 6.1 percent). As in the fourth quarter, the lower number of turkeys
slaughtered was partially offset by higher average weights. For December, the
average liveweight at slaughter was 30.8 pounds, 1.8 percent higher than a
year earlier.

The increased turkey meat production throughout 2012 has resulted in a large
increase in cold storage holdings of both whole birds and turkey parts, despite
record export levels. At the end of December 2012, turkey cold storage holdings
totaled 295 million pounds, up 40 percent from a year earlier. Stocks of whole
birds and turkey parts were both sharply higher compared with the previous year.
Stocks of whole birds increased the most, rising to 95.2 million pounds, up 76
11

percent from the previous year. While cold storage holdings of both hens and toms
had large increases, stocks of whole toms rose to 46.5 million pounds, 128 percent
higher than at the end of 2011. Stocks of turkey parts and turkey meat products
rose to 200 million pounds, a 28-percent increase, as stocks of breast meat,
mechanical deboned meat, and unclassified products rose significantly. Moving in
the opposite direction were stocks of legs (down 18 percent) and other turkey
products (down 8 percent). With higher turkey production expected during three of
the four quarters of 2013, -turkey cold storage holdings are expected to remain close
to or slightly higher than a year earlier through the first three quarters of 2013.
However, they are expected to end the year slightly below the previous year as
domestic demand improves.

The national price for frozen whole hen turkeys averaged 96.3 cents per pound in
January 2013, a decrease of 2 percent from January 2012, a small decline
considering the size of the increase in stocks of whole turkeys. With large stocks
and slightly higher production expected during 2013, prices for whole turkeys are
likely to remain under strong downward price pressure during at least the first half
of 2013.

With the exception of breast meat, prices for turkey parts and turkey meat products
were all lower in December 2012 compared with a year earlier. Prices for
drumsticks averaged $0.61 per pound, down 23 percent, and wing prices were-48
percent lower at $0.44 per pound. While turkey breasts rose slightly, prices of
boneless/skinless breast fell to $1.77 cents per pound, a decline of 32 percent from
December 2011. With higher beginning stocks and higher production, prices for
almost all turkey parts and turkey meat products are likely to be under continued
downward price pressure during most of 2013.

Table Egg Production Forecast at 6.8 Billion Dozen in 2013

Table egg production is expected to increase slightly (1 percent) in 2013, reaching
6.78 billion dozen, up from 6.7 billion dozen in 2012. Production increases are
expected to occur in all four quarters, but most of the total increase is expected in
the first half of the year. The production growth is expected to come from increases
in the number of hens in the table egg flock, with relatively little change in the rate
of eggs produced per bird. Egg production in 2013 will be sensitive to changes in
feed costs, but relatively strong prices in 2012 are expected to encourage expanded
production. Higher egg production is also expected to be supported by a gradually
expanding domestic economy.

In 2012, the number of birds in the table egg flock was higher throughout the year
and averaged 1.3 percent above the 2011 level. With this gain in the number of
hens in the table egg production flock, egg production rose to 6.7 billion dozen, up
1.6 percent from the previous year. As with the number of hens, the monthly
number of table eggs produced was higher on a year-over-year basis throughout
2012. With a 2-percent gain in production in December, table egg production
totaled 1.73 billion dozen in fourth-quarter 2012, an increase of 2.7 percent from the
same period in 2011.

Hatching egg production for 2013 is forecast at 1.04 billion dozen, up slightly (0.9
percent) from 2012. The increase is expected as the broiler industry expands
production in 2013 and requires higher numbers of meat-type chicks for growout.
The gain in production is expected to come from a small increase in the number of
12

hens in the meat-type egg supply flock. The production of hatching eggs is
dominated by the production of meat-type eggs to produce broiler chicks for
growout. In 2012, these eggs accounted for 93 percent of all hatching
egg production.

Hatching egg production for broiler-type eggs was the opposite of table egg
production. The number of hens and the number of eggs produced was lower on a
year-over-year basis for the first 11 months of 2012. Both of these measures turned
higher in December, and the number of hens and broiler type egg production is
expected to be higher in 2013.

The gains in table egg production throughout 2012 would normally place downward
pressure on prices. However, there was a strong increase in prices in third-quarter
2012, due in considerable part to strong export shipments to Mexico. This pushed
the wholesale price for one dozen grade A large eggs in the New York market to
$1.17 per dozen in 2012, 1.9 percent higher than the previous year. Prices in 2013
are expected to be higher during the first half of the year but to become lower in the
second half and average slightly lower for all of 2013.

13

Poultry Trade

Broiler Shipments Were Up in December

In December 2012, broiler shipments totaled 607.1 million pounds, a 4-percent
increase from last December. Most of the increase in December 2012 broiler
shipments came from, Mexico, Angola, and China, three of the U.S. top seven
broiler markets. Broiler shipments to Mexico rose by 10 million pounds (11
percent) from the 97 million pounds shipped in December 2011. Shipments to
Angola and China rose by 131 and 174 percent, respectively, from a year earlier.
Other broiler markets, such as United Arab Emirates and Georgia, were also large
contributors to December’s increase in broiler shipments. In December 2012,
shipments to Georgia rose 15 million pounds from a year ago, while shipments to
the United Arab Emirates increased almost 12 million pounds over the
same period.

Broiler Shipments Finished Strong in Fourth-Quarter

Broiler shipments finished the 2012 year with large volumes of broiler meat shipped
during the last 3 months. In the fourth-quarter, broiler shipments totaled 1.886
billion pounds, a slight increase from the 2011 fourth-quarter total. Major
contributors included Mexico, Angola, and Canada. Shipments to Mexico
increased 29 percent in the 2012 fourth-quarter over last year’s fourth-quarter, while
exports to Angola and Canada were up 35 percent and 20 percent, respectively, over
the same period in 2011.

Turkey Shipments Dropped in December

Turkey shipments in December 2012 were down 11 percent from the previous year.
A total of 63.5 million pounds of turkey meat were shipped abroad. The chief
reasons for the decline in turkey shipments are strong whole turkey prices and an
increase in Mexican broiler meat imports from the U.S. Mexico accounted for 52
percent of total U.S. turkey meat exports. Relatively inexpensive broiler meat prices
have captured some of the turkey meat markets as consumers purchase relatively
cheaper poultry meat. Turkey shipments to China were up considerably from a year
ago, an increase of 60 percent. Although there were other increases in December in
turkey shipments to various smaller markets, their totals were not enough to offset
the overall decline in turkey shipments to Mexico for the month.

2012 Fourth-Quarter Turkey Shipments Up from a Year Earlier

The total volume of turkey meat shipped over the last months is the largest ever
recorded. Turkey shipments were up 10 percent from last year’s fourth-quarter
totals. Two of the U.S. primary turkey markets, Mexico and China, accounted for
63 percent of the total turkey meat shipped during the 2012 fourth quarter. Of the
two major markets, Mexico continues to be the largest destination for U.S.
turkey meat.

Egg and Egg Products Shipments Rose in December

Egg and egg product shipments in December 2012 rose 19 percent from a year
earlier, for a total of 25.7 million dozen. The increase in shipments is partly due to
14

large exports to Mexico. In June 2012, the Avian Influenza (AI) outbreak at two
layer farms in Jalisco caused a major reduction in Mexico’s egg supply. In
attempting to replenish the loss from one of the major production areas, Mexico
increased its dependence on U.S. egg exports, with shipments to Mexico rising 125
percent in December 2012 from a year ago. Increases in exports to the U.S. top two
markets, Canada and Hong Kong, are also worth noting. Egg shipments to Canada
in December 2012 were up 10 percent from last December, while exports to Hong
Kong increased 28 percent in December 2012 over the same period.

Egg and Product Shipments in 2012 Fourth Quarter Were the
Largest Ever

The total volume of eggs and products shipped during the 2012 fourth quarter set a
new record. Egg and product shipments were up 27 percent from fourth quarter a
year earlier. While there have been increases in egg sales to Canada and Hong
Kong, the expansion in the Mexican market due to AI has caused a surge in the
supply of and exportation of eggs and products from the United States.

15

Sheep/Lamb

Sheep and Lamb Inventory Down Slightly in 2013

The sheep inventory registered a smaller decline than in the previous 2 years.
Despite the continuing drought conditions in most of the sheep producing areas, the
“grow our flock” program by the sheep industry appeared to slow the decline. The
NASS Sheep and Goats report estimated the inventory of all sheep and lamb in the
United States on January 1, 2013, at 5.34 million head, down 1 percent, a 30,000
head decline from 2012. Texas, the largest sheep producing State, which saw a
200,000 head decline in inventory in 2012, saw a 30,000 head increase in inventory
in 2013. Oregon and Montana also saw inventory increases, up 10,000 head each.
Though two of the five largest producing States registered declining inventories, the
numbers were much smaller than the previous year. Among the top decliners were
Colorado (25,000 head), Iowa (20,000 head), Minnesota (15,000), and South
Dakota and Utah (both registering 10,000 head declines). California, the number 2
sheep producing State, remained unchanged.

Despite a 20,000-head increase in breeding sheep in Texas, the total U.S. breeding
sheep inventory also decreased 1 percent from a year ago to 3.98 million head, a
20,000-head decrease. Interestingly, Colorado, which saw a drop in all sheep
inventory, registered a 5,000-head increase in breeding sheep. Iowa registered the
largest decline in breeding sheep (15,000 head).

Prices To Show Strength in 2013

Unlike 2010, when slaughter lamb prices were strong for the entire year, the 2012
slaughter lamb prices started strong in the first two quarters but tapered off
substantially in the second half of the year. The Choice slaughter lamb prices at
San Angelo averaged $112.89 after the second-half slide in prices. The drop in
second-half prices may have been the result of a backup of overfinished animals in
the system. Prices are expected to rebound in 2013 and average $104-$111 per
hundredweight. Continued tight supplies and fairly stable demand are expected to
contribute to the improved prices.

The NASS Sheep and Goats report shows the market sheep and lamb inventory is
down 1 percent from January 2012, which suggests that lamb meat supply will also
be down in 2013. Commercial lamb and mutton production totaled 156 million
pounds in 2012, up 5 percent from 2011. First-quarter 2013 lamb and mutton
production is expected to be 38 million pounds, just under 4 percent less than the
same period in 2012. The smaller 2012 lamb crop and the smaller number of market
lambs are expected to result in further declines for 2013, with production expected
at 152 million pounds.

Production Up, Imports Down in 2012

In 2012, imports of lamb and mutton were down 6 percent from the same period in
2011. Economic weakness affected lamb demand during this period. Imports in
December came in at around 14 million pounds, resulting in lamb and mutton
imports for the fourth quarter of 40 million pounds and a total of 154 million
pounds for 2012. Imports fell below commercial production by about 2 million
pounds. This is the first year since 2005 that imports have fallen below commercial
16

production. First-quarter 2013 imports are expected to be around 45 million pounds,
22 percent above the same period in 2012, but due to the lower U.S. lamb crop in
2012, imports in 2013, are expected to increase by about 7 percent to around 165
million pounds.

Exports declined 43 percent to 11 million pounds in 2012. December exports came
in at 454,000 pounds, with a fourth-quarter total of 3 million pounds. In the same
period in 2011, they were 5 million pounds. First-quarter 2013 exports are forecast
at 5 million pounds, up 67 percent from the same period in 2012, but exports in
2013 are expected to be up about 55 percent to 17 million pounds.

17

Dairy

Milk Production Continues To Advance Based On Yields, as the U.S.
Herd Contracts

The most recent USDA World Agricultural Supply and Demand estimates lowered
the 2012/13 season-average price of corn to $6.75-$7.65 per bushel. Lower
expected exports lie behind the price drop. Greater expected competition from
Brazil offset higher expected domestic food, seed, and industrial use. In contrast,
the soybean meal price forecast was unchanged from January at $430-$460 per ton.
The outlook for forages remains precarious. The Crop Production report released
February 8, 2012, estimated total U.S. hay production in 2012 at 119.9 million tons.
This estimate is about 9 percent below 2011 and 16 percent below the 5-year
average. However, the drought impact is not uniform. The upper Midwest is most
adversely affected, with the 2012 crop trailing last year by 29 percent. The Texas-
Oklahoma production is expected to be nearly double 2011 totals, but 2011 was one
of the worst drought years ever for the Texas-Oklahoma area.

Feed prices will continue to inch upward early this year; but for the year as a whole,
feed prices should be slightly lower in 2013 than last year. The feed outlook is
predicated on the lower expected corn price and a return to a more nearly normal
forage yield for 2013/14.

For January, weekly dairy cow slaughter continued above the 2012 pace. The
January Cattle report showed the cow population on January 1 close to 2012’s
population, but producers expect to retain 2 percent fewer heifers for breeding.
Based on this evidence, cow numbers are likely to show a gradual decline over the
course of 2013 and average 9,170 thousand head for the year. The prospect of lower
feed prices should prompt producers to maintain feeding rates and continue to boost
yields. Milk per cow is expected to average 21,920 pounds for the year, with most
of the year-over-year increase coming after the first quarter in 2013. Total 2013
milk production is forecast at 201.0 billion pounds, another year-over-year rise.

Milk-equivalent imports for 2013 were unchanged from the January forecast on
both a fats and skims-solids basis, at 4.0 billion pounds and 5.4 billion pounds,
respectively. Fats basis exports were unchanged for February at 9.0 billion pounds.
Skims-solids basis exports were raised slightly to 33.7 billion pounds. Firm nonfat
dry milk (NDM) prices, despite higher than expected December ending stocks,
suggest a potentially strong NDM export pace, at least in early 2013. Ending stocks
on both a fats and skims-solids basis were trimmed in this month’s forecast based
on stronger domestic demand and only a modest increase in milk production.

Dairy product prices for 2013 were only slightly changed from January forecasts.
The cheese price is forecast at $1.715-$1.785 per pound, unchanged from last
month, although the range was narrowed. Butter prices are projected to average
$1.535-$1.635 per pound. The upper end of the forecast price range was lowered
from last month, effectively lowering the midpoint of the price forecast. Butter
supplies are expected to remain relatively plentiful. NDM prices were raised
slightly this month to $1.465-$1.525 per pound on the basis of current prices,
continued export strength, and expected tightening stocks over the course of this
year. Similar logic underlies the raise in whey prices to 61.5-64.5 cents per pound.

18

The Class IV price is forecast at $17.00-$17.80 per hundred-weight (cwt). This
represents an increase in the lower end of the forecast range from last month and is
based on the perceived strength of the powder market. The Class III price range
was narrowed from last month’s forecast to $17.70-$18.40 per cwt as cheese prices
are unchanged and only a small increase is forecast in the whey price. The all milk
price is forecast at $18.90-$19.60 per cwt, representing a narrowing of the
forecast range.

19

February 21-22, 2013
Crystal Gateway Marriott Hotel
Arlington, Virginia

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Contacts and Links 2
Contact Information
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cattle/beef trade, and veal)
Christopher Davis (poultry trade) (202) 694-5167 chrisdavis@ers.usda.gov
Readers of ERS outlook reports
Mildred M. Haley (hogs/pork) (202) 694-5176 mhaley@ers.usda.gov
have two ways they can receive an
David J. Harvey (poultry, eggs) (202) 694-5177 djharvey@ers.usda.gov
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reports and associated data.
Roger Hoskin (dairy) (202) 694-5148 rhoskin@ers.usda.gov
Keithly Jones (sheep and goats) (202) 694-5172 kjones@ers.usda.gov
• Receive timely notification (soon
Ken Mathews (cattle) (202) 694-5183 kmathews@ers.usda.gov
after the report is posted on the web)
Laverne Creek(web publishing) (202) 694-5191 lmcreek@ers.usda.gov
via USDA’s Economics, Statistics
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activities on the basis of race, color, national origin, age, disability, and, where applicable, sex,
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(202) 720-6382 (TDD). USDA is an equal opportunity provider and employer.

21

U.S. red meat and poultry forecasts
2010 2011 2012 2013
I II III IV Annual I II III IV Annual I II III IV Annual I II III IV Annual

Production, million lb
Beef 6,248 6,546 6,768 6,741 26,305 6,410 6,559 6,736 6,490 26,195 6,283 6,475 6,584 6,571 25,913 6,305 6,360 6,340 6,090 25,095
Pork 5,607 5,302 5,401 6,126 22,437 5,719 5,370 5,484 6,186 22,758 5,858 5,519 5,631 6,243 23,251 5,795 5,570 5,690 6,370 23,425
Lamb and mutton 43 40 39 42 164 36 40 36 37 149 39 39 39 39 156 38 38 38 38 152
Broilers 8,733 9,198 9,496 9,484 36,910 9,290 9,509 9,542 8,860 37,201 9,090 9,377 9,372 9,197 37,036 9,100 9,400 9,400 9,400 37,300
Turkeys 1,340 1,383 1,415 1,506 5,644 1,402 1,471 1,423 1,495 5,791 1,446 1,505 1,480 1,537 5,968 1,450 1,500 1,500 1,575 6,025

Total red meat & poultry 22,122 22,626 23,291 24,058 92,097 23,011 23,113 23,396 23,225 92,745 22,868 23,083 23,272 23,735 92,958 22,836 23,032 23,132 23,624 92,624
Table eggs, mil. doz. 1,610 1,626 1,645 1,666 6,547 1,624 1,634 1,646 1,686 6,590 1,653 1,642 1,668 1,732 6,695 1,685 1,675 1,685 1,735 6,780

Per capita disappearance, retail lb 2/
Beef 14.6 15.1 15.3 14.6 59.6 14.1 14.6 14.7 14.0 57.3 14.0 14.7 14.5 14.2 57.4 14.3 14.1 14.0 13.6 56.1
Pork 11.8 11.4 11.7 12.8 47.8 11.4 11.1 11.0 12.2 45.7 11.1 10.9 11.2 12.4 45.7 11.1 11.1 11.4 12.4 46.1
Lamb and mutton 0.2 0.2 0.2 0.2 0.9 0.2 0.2 0.2 0.2 0.8 0.2 0.2 0.2 0.2 0.8 0.2 0.2 0.2 0.2 0.9
Broilers 20.1 20.5 21.4 20.4 82.4 21.5 21.5 20.8 19.1 82.9 20.1 20.4 20.3 19.7 80.4 20.0 20.5 20.3 20.2 80.9
Turkeys 3.5 3.6 4.1 5.2 16.4 3.5 3.5 4.0 5.0 16.1 3.5 3.6 4.1 4.8 16.0 3.6 3.7 3.9 5.2 16.3

Total red meat & poultry 50.7 51.2 53.3 53.7 208.9 51.3 51.3 51.0 51.0 204.6 49.3 50.3 50.6 51.7 202.0 49.6 50.0 50.3 52.0 201.9
Eggs, number 61.5 61.4 62.2 62.8 247.9 61.1 61.3 62.2 63.1 247.6 62.1 60.8 61.9 64.0 248.7 62.5 62.0 62.4 63.9 250.8

Market prices
Choice steers, 5-area Direct, $/cwt 89.44 96.33 95.47 100.28 95.38 110.07 112.79 114.05 121.99 114.73 125.29 120.91 119.69 125.54 122.86 125-129 124-132 125-135 127-137 125-134
Feeder steers, Ok City, $/cwt 98.73 112.65 112.29 113.55 109.31 127.20 131.09 134.74 141.93 133.74 152.81 150.05 139.31 143.40 146.39 147-151 142-150 144-154 149-159 143-152
Cutter Cows, National L.E., $/cwt 51.79 58.79 58.90 54.93 56.10 68.66 74.88 66.11 63.54 68.30 76.57 83.51 76.94 73.81 77.71 76-78 79-83 78-84 77-81 77-82
Choice slaughter lambs, San Angelo, $/cwt 103.87 106.17 115.57 141.62 116.81 174.66 157.99 161.13 148.61 160.60 145.33 127.08 89.28 89.85 112.89 108-112 101-109 100-110 105-115 103-122
Barrows & gilts, N. base, l.e. $/cwt 50.41 59.60 60.13 50.11 55.06 59.94 68.80 71.06 64.66 66.11 61.68 61.79 61.43 58.63 60.88 61-63 65-69 64-70 55-59 61-65
Broilers, 12 City, cents/lb 82.20 85.00 84.50 80.00 82.90 77.90 82.60 78.80 76.80 79.00 87.40 85.1 82 92.1 86.6 98-100 92-98 89-97 89-97 92-98
Turkeys, Eastern, cents/lb 75.60 84.40 97.90 103.70 90.40 90.20 99.90 106.40 111.60 102.00 100.70 106.9 108.5 106.1 105.6 97-99 99-105 102-110 104-112 100-107
Eggs, New York, cents/doz. 126.00 82.80 93.10 123.20 106.30 105.80 106.60 117.70 131.20 115.30 108.70 99.7 131.9 129.4 117.4 123-127 107-113 104-122 118-128 113-120

U.S. trade, million lb
Beef & veal exports 478 585 590 646 2,299 633 702 766 683 2,785 558 625 651 640 2,474 595 650 630 575 2,450
Beef & veal imports 573 690 598 436 2,297 461 593 548 454 2,057 582 669 516 465 2,232 625 680 655 605 2,565
Lamb and mutton imports 47 46 31 42 166 49 48 31 34 162 37 38 38 41 154 45 40 35 45 165
Pork exports 1,046 1,081 951 1,146 4,224 1,248 1,200 1,261 1,481 5,189 1,444 1,302 1,252 1,490 5,488 1,400 1,315 1,250 1,490 5,455
Pork imports 199 204 237 219 859 201 195 194 213 803 207 191 198 210 806 205 195 200 200 800
Broiler exports 1,469 1,699 1,643 1,954 6,765 1,527 1,588 1,978 1,879 6,971 1,737 1,791 1,867 1,875 7,270 1,775 1,750 1,875 1,850 7,250
Turkey exports 114 136 158 174 582 159 171 173 199 703 181 185 216 225 807 205 205 210 210 830
Live swine imports (thousand head) 1,446 1,408 1,479 1,416 5,749 1,452 1,429 1,407 1,508 5,795 1,441 1,444 1,387 1,395 5,667 1,375 1,350 1,350 1,455 5,530
1/ Forecasts are in bold.
2/ Per capita meat and egg disappearance data are calculated using the Resident Population Plus Armed Forces Overseas series from the Census Bureau of the Department of Commerce.
Source: World Agricultural Supply and Demand Estimates and Supporting Materials.
For further information, contact: Richard Stillman, (202) 694-5265, stillman@ers.usda.gov
2/14/2013

22

Dairy Forecasts
2011 2012 2013
IV Annual I II III IV Annual I II III IV Annual

Milk cows (thous.) 9,216 9,194 9,254 9,257 9,214 9,199 9,231 9,200 9,175 9,160 9,145 9,170
Milk per cow (pounds) 5,279 21,346 5,513 5,562 5,284 5,337 21,696 5,450 5,630 5,425 5,415 21,920
Milk production (bil. pounds) 48.7 196.2 51.0 51.5 48.7 49.1 200.3 50.1 51.7 49.7 49.5 201.0
Farm use 0.2 1.0 0.2 0.2 0.2 0.2 1.0 0.2 0.2 0.2 0.2 1.0
Milk marketings 48.4 195.3 50.8 51.2 48.4 48.8 199.3 49.9 51.4 49.4 49.3 200.0

Milkfat (bil. pounds milk equiv.)
Milk marketings 48.4 195.3 50.8 51.2 48.4 48.8 199.3 49.9 51.4 49.4 49.3 200.0
Beginning commercial stocks 12.3 10.8 10.9 13.3 14.3 12.8 10.9 11.9 12.8 14.8 13.8 11.9
Imports 1.2 3.5 0.9 0.9 1.0 1.2 4.0 1.0 1.0 0.9 1.1 4.0
Total supply 62.0 209.6 62.5 65.4 63.7 62.9 214.2 62.7 65.2 65.0 64.2 215.9
Commercial exports 2.1 9.4 2.2 2.8 2.0 1.9 8.8 2.1 2.3 2.4 2.2 9.0
Ending commercial stocks 10.9 10.9 13.3 14.3 12.8 11.9 11.9 12.8 14.6 13.8 11.1 11.1
Net removals 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Commercial use 49.0 189.2 47.1 48.3 48.9 49.2 193.5 47.8 48.3 48.8 50.9 195.7

Skim solids (bil. pounds milk equiv.)
Milk marketings 48.4 195.3 50.8 51.2 48.4 48.8 199.3 49.9 51.4 49.4 49.3 200.0
Beginning commercial stocks 12.2 12.2 11.8 12.5 12.2 11.3 11.8 12.0 11.8 12.3 12.1 12.0
Imports 1.4 5.3 1.4 1.4 1.5 1.4 5.7 1.3 1.3 1.3 1.4 5.4
Total supply 62.0 212.7 64.0 65.2 62.1 61.6 216.8 63.2 64.5 63.0 62.8 217.4
Commercial exports 8.2 32.5 8.3 9.0 8.4 7.8 33.5 8.3 8.6 8.5 8.4 33.7
Ending commercial stocks 11.8 11.8 12.5 12.2 11.3 12.0 12.0 11.8 12.3 12.1 11.6 11.6
Net removals 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Commercial use 42.0 168.3 43.2 44.0 42.4 41.8 171.4 43.1 43.6 42.5 42.8 172.1

Milk prices (dol./cwt) 1/
All milk 20.07 20.14 17.97 16.40 18.20 21.47 18.51 19.05 18.75 18.90 19.00 18.90
-19.35 -19.35 -19.80 -20.00 -19.60

Class III 18.62 18.37 16.28 15.53 17.80 20.17 17.44 17.30 17.80 18.05 17.65 17.70
-17.60 -18.40 -18.95 -18.65 -18.40

Class IV 17.72 19.04 15.94 13.86 15.87 18.34 16.01 17.35 17.20 16.85 16.60 17.00
-17.75 -17.90 -17.85 -17.70 -17.80

Product prices (dol./pound) 2/
Cheddar cheese 1.799 1.825 1.559 1.547 1.773 1.952 1.708 1.665 1.720 1.755 1.720 1.715
-1.695 -1.780 -1.845 -1.820 -1.785

Dry whey 0.636 0.533 0.646 0.544 0.541 0.643 0.594 0.635 0.625 0.605 0.595 0.615
-0.655 -0.655 -0.635 -0.625 -0.645

Butter 1.728 1.950 1.499 1.409 1.684 1.785 1.594 1.495 1.530 1.560 1.555 1.535
-1.555 -1.620 -1.680 -1.685 -1.635

Nonfat dry milk 1.461 1.506 1.368 1.170 1.269 1.505 1.328 1.525 1.495 1.440 1.415 1.465
-1.555 -1.545 -1.510 -1.485 -1.525

1/ Simple averages of monthly prices. May not match reported annual averages.
2/ Simple averages of monthly prices calculated by the Agricultural Marketing Service for use in class price formulas. 'Based on weekly "Dairy Product Prices",
National Agricultural Statistics Service. Details may be found at http://www.ams.usda.gov/dyfmos/mib/fedordprc_dscrp.htm

Source: World Agricultural Supply and Demand Estimates and supporting materials.
For further information, contact: Roger Hoskin 202 694 5148, rhoskin@ers.usda.gov

Updated 2/13/13

23

Ldp m february 2013

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