United States

Department

of Agriculture

www.ers.usda.gov

Electronic Outlook Report from the Economic Research Service

LDP-M-87-01

October 2001

Livestock, Dairy, and Poultry

Outlook, 2000 in Review 

And 2001 Outlook

Abstract

This report examines changes in the livestock industry in 2000 and provides initial

assessments of 2001 based on forecasts from the August 2001 World Agricultural

Supply and Demand Estimates. Strong economic growth in the United States in 2000

boosted the demand for high quality cuts of red meats, thereby increasing wholesale

prices of beef, pork and lamb. However, broiler and farm milk prices declined compared

with 1999. Poultry output remained strong in 2000 as exports increased by 9 percent.

Extreme weather conditions may dampen beef production in 2001. U.S. pork exports

should increase by 18 percent in 2001.

Keywords: Review, outlook, livestock, dairy, and poultry.

Acknowledgments

The coordinator would like to acknowledge Joy Harwood, Janet Perry, Lewrene Glaser,

and John Dunmore for their helpful suggestions and comments during the preparation of

this article, as well as Shayle Shagam, Scott Sindelar, and Leland Southard for their

comments and reviews. Appreciation also is extended to Don Blayney, Ron Gustafson,

William Hahn, Mildred Haley, David Harvey, Keithly Jones, Dale Leuck, Milton

Madison, and James Miller for their keen insights. Thanks also to Martha Evans,

Cynthia Ray, and Wynnice Pointer-Napper for their technical assistance.

Delmy L. Salin, Coordinator
This review provides an analysis of the year 2000 for

U.S. livestock, dairy, and poultry. It also looks at the

early developments of 2001 and presents forecasts

from the August 2001 World Agricultural Supply and

Demand Estimates.

Strong economic growth in the United States in 2000

produced an increase in personal disposal income that

boosted food expenditures. Although overall per capita

consumption of red meat and poultry stayed about the

same as in 1999, about 220 pounds, higher incomes

increased the demand for commercially prepared food

and more expensive cuts of beef and pork. Exports in

2000 accounted for about 12 percent of total U.S. red

meat and poultry production. In 2001, exports are

expected to climb by 5 percent due to higher shipments of pork, broilers, and turkeys.

U.S. beef production reached a record level during

2000. Increasing demand for higher quality beef resulted in the highest retail prices for Choice beef since

1993. Commercial cow slaughter was not sufficient to

meet domestic demand for processed beef (largely for

hamburgers), thereby causing increased imports, mostly

from Australia and New Zealand. Despite a slowdown

in the U.S. economy in 2001, the upward trend in cattle

prices is expected to continue due to the sustained

demand for high quality beef. However, beef exports in

2001 are expected to decline by 6 percent due to lower

supplies during the first half of the year, record U.S.

prices, a slowdown in the world economy, and the continued strength of the U.S. dollar. 

Declining 2000 commercial pork production, coupled

with the strong demand for pork products, especially

bacon and loins, raised wholesale and retail prices.

Higher hog and pork prices, along with relatively low

feed costs, dramatically improved producers’ returns,

which were above break-even in early 2000 for the

first time since 1997. Despite those higher prices,

commercial pork production in 2001 is expected to

increase by only 1 percent due to producers’ caution in

expanding their breeding herds.

Total poultry output increased in 2000 by 2.4 percent

compared with 1999, in part due to relatively low feed

costs. Domestic consumption rose by only 1 percent,

while a 9-percent increase in exports (mostly dark

meat parts) absorbed the increase in production.

Wholesale broiler prices declined, while turkey prices

increased. Poultry production in 2001 is expected to

increase by 1 percent. Slower growth in broiler production and rising exports will help to support prices,

while turkey prices are expected to decline because of

a third year of expanding production.

Consumption of eggs in 2000 increased by about three

eggs per capita due to the rise in demand in the breaking egg market for commercial baking, confections,

and the fast food industry. The strong demand for eggs

more than offset the increase in production, resulting

in higher wholesale prices. 

The rapid increase in milk production in 2000 outpaced demand, resulting in lower farm milk prices.

Farm milk prices were the lowest since 1991. On the

other hand, retail prices rose slightly, resulting in an

increase in the farm-to-retail price spread. Expansion

in world demand for nonfat dry milk caused a greater

than 40-percent increase in international prices. Even

though international butter prices declined, the impact

in the U.S. market was negligible due to the tight

domestic milkfat market. Average 2001 milk prices are

expected to return to the levels of the late 1990s. The

substantial recovery in 2001 farm milk prices will likely be a result of the strong demand for cheese and butter and the slight decrease in milk production.

In 2000, the U.S. sheep industry continued its downward

trend, which is expected to persist in 2001. However, the

rate of inventory decline will likely be slower in 2001. In

order to offset the decrease in domestic supply given

fairly stable demand, total imports increased by 15 percent in 2000 compared with 1999. Imports represented

more than one-third of total consumption and came

mostly from Australia and New Zealand. Ethnic diversity

in the U.S. population has helped maintain per capita

consumption in recent years. In 2000, lamb prices

increased about 5 percent compared with 1999 and are

expected to be virtually unchanged in 2001.

In summary, due to the strong economy in 2000, consumers demanded more poultry products and high

quality cuts of red meat, boosting the wholesale prices

of beef, pork, turkey, eggs, and lamb. However, broiler

and farm milk prices declined compared with 1999.

Despite the slowdown in the U.S. economy in 2001,

prices are expected to increase due to the continuous

demand for high quality red meat cuts and dark meat

poultry parts, especially for exports. Turkey prices are

the exception to this trend.

2 Economic Research Service, USDA

Higher Income Boosts Demand for Higher Priced Meat Cuts

For more information about this report contact

Delmy Salin, 202-694-5170, dsalin@ers.usda.gov.
Record Production and Higher Retail Prices

In 2000; 2001 Production Slides Slightly

Even though the cattle inventory continues the decline

that began in 1996, beef production in 2000 totaled a

record 26.8 billion pounds due to historically large

heifer slaughter and record-high dressed weights. Dry

conditions throughout much of the country, particularly

in the Southeast, Great Plains, and Western grazing

areas, coupled with attractive grain prices, forced more

cattle, especially heifers, into feedlots. The large number of heifers placed on feed rather than being retained

for herd expansion continued the contraction in the cattle inventory. Expansion of the drought conditions during the spring and summer of 2001 in the Pacific

Northwest and Southern Great Plains resulted in a large

placement of cattle into feedlots. In the first-half of

2001, beef production declined by 5 percent from a year

earlier due to the unusually harsh winter and early

spring. Due to extreme weather conditions, increased

heifer placements are expected to slow the total 2001

decline in beef production to about 3 percent (fig. 1).

Fed cattle prices remained strong during 2000, averaging $69.65 per hundredweight (cwt), up about 6 percent from a year earlier. Similarly, feeder cattle prices

increased about 13 percent compared with 1999, averaging $86.17 per cwt. Likewise, beef cow prices

increased to $41.71 per cwt. The strength of cattle

prices in 2000 was a combination of feeder cattle supplies tightening cyclically, the strong economy, weather conditions, and continued high consumer confidence. Demand for high quality beef in the domestic

market increased, especially by hotels and restaurants.

In addition, growing meat export markets, fueled by

stronger economies globally in 2000, contributed to

price increases. Despite a cooling of the U.S. economy

in 2001, the sustained demand for high quality beef

and limited supply continue to push cattle prices higher in the first half of 2001. Fed cattle prices may

remain strong in 2001, but will likely decline from

first-half peaks. Feeder cattle prices, already relatively

high, are expected to rise slightly.

Composite retail prices for Choice beef averaged

$3.07 a pound in 2000, up 18 cents from a year earlier,

the strongest prices since 1993. Per capita beef consumption has shown an upward trend since the late

1990s (fig. 2). The strong demand, especially for higher quality beef in the hotel-restaurant-export markets

and retail outlets, combined with only modest production increases, resulted in record retail prices. Average

Choice retail beef prices in 2001 are expected to continue a record-setting pace due to lower than anticipatEconomic Research Service, USDA 3

Beef

Figure 1

Production of most animal products up in 2000

-3.0

-1.2

0.6

1.3

2.5

1.6

-8.3

1.5

3.0

-1.8

2.5

2.0

1.8

-5.7

-10.0 -5.0 0.0 5.0

Beef

Milk

Pork

Broilers

Turkeys

Eggs

Lamb &

Mutton

Percentage change in U.S. production from previous year

2000

2001F

2001 forecast from August World Agricultural Supply and 

Demand Estimates, USDA.

2.7

2.9

3.1

3.3

3.5

1992 1995 1998 2001F

$ per lb

63

65

67

69

71

lb per capita

Per capita consumption

Retail price

Annual average retail price. 2001 forecast from August World 

Agricultural Supply and Demand Estimates, USDA.

Figure 2

Beef prices continued to rise in 2000 as 

consumption slipped
ed beef supplies, especially in high quality beef early

in the year. The lower supplies have been caused by

extreme weather conditions since late 2000. Retail

beef prices reached a peak of $3.45 a pound during the

second quarter of 2001 due to tight supplies and are

expected to decline during the second half of the year

as the supply increases. 

The rise in retail prices widened the farm-to-retail

price spread to $1.57 per pound, an increase of nearly

11 cents per pound compared with 1999. Even though

the net farm value rose by 8 cents, the farmers’ share

of the retail price of a pound of Choice beef declined

slightly. The 2000 retail beef and veal price index

(measured by the Bureau of Labor Statistics) increased

by 6.4 percent. The Economic Research Service has

estimated that changes in the farm value are fully

reflected in the retail prices after about 4 months. See

our website for more information on meat price

spreads (http://www.ers.usda.gov/briefing/foodpricespreads/meatpricespreads/). 

U.S. beef exports were supported by strong economic

growth in major export markets during 2000. The United

States and Canada are the primary sources of high quality beef in world markets. Exports accounted for about 9

percent of total U.S. beef production (fig. 3). Japan and

Mexico were the major U.S. beef trading partners,

accounting for two-thirds of our total beef exports. Total

exports grew by 4 percent in 2000, to 2.5 billion pounds

compared with 1999, led by strong increases in exports

to South Korea and Mexico. However, exports in 2001

are expected to decline by 6 percent due to lower supplies during the first-half of the year, record U.S. prices,

a slowdown in the world economy, as well as the continued strength shown by the U.S. dollar. 

Mexico, a long-standing major purchaser of U.S. beef,

is anticipated to remain a robust market because it cannot satisfy its consumption from domestic supplies.

Weather, topography, and limited feed grain supplies

have influenced the structure of Mexico’s cattle industry, which limits its domestic capacity. Moreover, live

cattle exports to Mexico have declined in recent years

due to drought and poor financial conditions that have

discouraged Mexican farmers from replenishing their

depleted herds. As a result, Mexico may have to rely

more on imports to meet its growing demand for beef.

Mexican exports of feeder cattle to the United States for

feeding is due largely to lack of grains, dependency on

seasonal forage supplies, and relatively high prices for

feeder cattle in the United States. A current analysis of

the cattle and beef market, with a special emphasis on

the integration of the U.S.-Mexico cattle industry, can

be found in an article by Leuck and Link (U.S.-Mexico

Cattle Industries Becoming More Integrated, Livestock,

Dairy, and Poultry Situation and Outlook, LDP-M-73,

July 26, 2000, http://www.ers.usda.gov/publications/

so/view.asp?f=livestock/ldp-mbb/). 

Strong economic growth in the United States resulted

in a strong demand for processed beef in 2000, and

demand is expected to remain at about the same level

in 2001. High processed-meat demand, combined with

declining U.S. cow slaughter, encouraged a 5-percent

increase in beef imports over 1999. Australia, Canada,

and New Zealand accounted for about 85 percent of

the 3 billion pounds of total U.S. beef imports. As U.S.

supplies of processing meat dropped, imports from

Australia and New Zealand (major exporters of grassfed manufacturing-grade beef) increased by 18 and 14

percent, respectively. The favorable exchange rate for

shipments to the United States, as well as the relatively

lower cost to raise grass-fed cattle in Australia and

New Zealand, made imports of processed beef from

these countries attractive. 

For more information on the domestic beef sector

contact Ronald Gustafson, 202-694-5174,

ronladg@ers.usda.gov; for the international beef 

sector contact Dale Leuck, 202-694-5186,

djleuck@ers.usda.gov.

4 Economic Research Service, USDA

Figure 3

Broiler exports accounted for 18 percent of total

production in 2000

20

9

2

9

8

2

18

9

2

9

7

2

0 5 10 15 20 25

Exports as percentage

of total U.S. production

Broilers

Turkeys

Eggs

Beef

Pork

Lamb & Mutton

2000

2001F

2001 forecast from August World Agricultural Supply and 

Demand Estimates, USDA.
Declines in Production and Strong

Demand Led To increased Imports and

Prices in 2000; 2001 Exports Increase

While Imports Slide

Commercial pork production in 2000 totaled almost 19

billion pounds, a decline of nearly 2 percent compared

with 1999 (fig. 2). Due to poor returns in late 1998 and

early 1999, producers reduced the number of hogs kept

for breeding. The herd reduction resulted in a decline

in the number of sows farrowing and a lower pig crop,

leading to a 3-percent decline in 2000 hog slaughter.

However, the reduction in slaughter was partially offset

by heavier dressed weights. As returns improved, producers began to slowly rebuild their herds. The recovery was slow due to the large amount of capital

required to build new farrowing facilities and the costs

incurred in coping with environmental regulations.

Commercial pork production in 2001 is expected to

increase slightly due to continued weight gains. 

Hog prices were up 31 percent over the previous year

to $44.70 per hundredweight (cwt) in 2000 (fig. 4).

This hike in 2000 prices reflects the decline in production from record levels in 1999. The substitution of

pork, especially loins, for high price beef and the

strong demand for bacon, contributed to these higher

prices. The farm-to-retail price spread narrowed slightly, as net farm value of pork rose by 19 cents and retail

prices increased by only 17 cents. The 2000 retail pork

price index (measured by the Bureau of Labor

Statistics) increased by 7.3 percent. The farmers’ share

of the value of a pound of pork in a retail case rose

from 25 percent in 1999 to 31 percent in 2000. As

retail prices rose, per capita consumption of pork

declined by 1.4 pounds compared with 1999 and

equaled the 1998 level. Higher hog and pork prices,

along with relatively low feed prices, drastically

improved producers’ returns, which were above

breakeven in early 2000 for the first time since late

1997. Hog prices in 2001 are expected to continue

increasing, but at a slower rate compared with 2000,

averaging in the mid-40s per cwt. 

U. S. pork exports in 2000 increased by 2 percent over

1999, to 1.3 billion pounds, representing about 7 percent of total U.S. pork production (fig. 3). Japan,

Mexico, and Canada were the major destinations for

U.S. pork, accounting for 80 percent of total U.S.

exports. These three countries will likely be major purchasers again in 2001. Pork exports to Mexico

increased by 81 percent in 2000 compared with 1999

due to the strong economic growth in Mexico. During

the same period, pork exports to Russia declined by

about 78 percent. The absence of U.S. food aid to

Russia, combined with aggressive European Union

(EU) export subsidies, accounted for the very low

Russian pork purchases. U.S. exports to Japan are

expected to rise in 2001 despite the triggering of the

import safeguard effective August 1, 2001, through

March 2002, which will increase the minimum import

price in Japan by almost 25 percent. Total U.S. pork

exports are expected to increase by 18 percent in 2001.

Expanded imports from Canada brought U.S. pork

imports up to 967 million pounds, an increase of about

17 percent in 2000. Three-quarters of U.S. pork

imports came from Canada, as did 4.3 million hogs.

Reasons for these increases include the depreciation of

the Canadian dollar relative to the U.S. dollar, making

it more attractive for the United States to import from

Canada, and the lack of slaughter and finishing capacity of Canadian pork processors. U.S. pork imports in

Economic Research Service, USDA 5

Pork

Figure 4

Hog prices recover in 2000

2001 forecast from August World Agricultural Supply and 

Demand Estimates, USDA.

20

30

40

50

60

1992 1995 1998 2001F

Hogs, $ per cwt

0.50

1.00

1.50

2.00

2.50

3.00

Pork, $ per lb

Hog prices

Retail pork prices
2001 are expected to decline by 5 percent. The 10-

week ban on pork imports from the EU due to the

foot-and-mouth disease (FMD) outbreak in the first

half of the year reduced the in-flow of baby-back ribs

and hams from the EU, mainly from Denmark. 

For more information on the domestic pork sector

contact Leland Southard, 202-694-5187,

southard@ers.usda.gov; for the international pork

sector contact Mildred Haley, 202-694-5176,

mhaley@ers.usda.gov.

6 Economic Research Service, USDA

The U.S. pork and poultry industries have experienced parallel structural changes in the last 30 years.

They both successfully adapted to changes, have

grown, and produce a high-quality product priced to

attract consumers. These changes have accompanied

major consolidation in the industries.

The broiler industry has been the leader in making

adaptations, integrating technology to deliver the product demanded at an attractive price to consumers.

Adopting new technologies, improving risk management, and stabilizing the orderly movement of birds

into processing plants have resulted in lower production costs, increased production, and lower retail

prices. Through production contracting and vertical

integration of the feed, hatchery, and processing

stages, firms could maintain large volumes yet still

control the flow of broilers at each stage, thereby

enabling them to capture economies of scale. By the

mid-1990s contracting accounted for 88 percent of

total broiler production. Along with these changes in

vertical integration and adoption of new technologies,

there has been a shift to larger production facilities. An

in-depth analysis of the consolidation in the poultry

industry can be found in the following three reports:

• Vertical Coordination in the Pork and Broiler

Industries: Implications for Pork and Chicken

Products, (http://www.ers.usda.gov/publications/

Aer777/index.htm)

• Structural Change in U.S. Chicken and Turkey

Slaughter, (http://www.ers.usda.gov/publications/

aer787/)

• Broiler Farms’ Organization, Management, and

Performance, (http://www.ers.usda.gov/publications/aib748/)

Similar to the poultry industry’s advances in vertical

integration and market adaptations, technological conditions have recently changed in the pork industry.

Improvements in genetics, nutrition, housing and handling equipment, veterinary medicine, and management have led to overall improvements in animal

health. In addition, the industry has shifted to less

reliance upon spot markets and greater utilization of

contractual relationships. In 1999, packers obtained

59 percent of their hogs through contracts or integrated operations compared with only 2 percent 30 years

ago. Furthermore, feed that was previously produced

by small onfarm feed mills is now replaced by feed

produced at large centralized mills and hauled to

farms. These structural changes may be expected to

increase pork supplies and generate higher quality

cuts, while maintaining attractive prices to consumers. 

As in the case of the broiler industry, the pork

slaughter industry has experienced consolidation.

Small, less efficient plants have disappeared. Larger

plants replace smaller ones because their costs of

slaughter and fabrication are lower and produce nearconstant returns to scale. From the 1970s to 1990s,

the growing cost advantages resulted in a shift to

larger hog slaughter and production plants (Scale

Economies and Consolidation in Hog Slaughter,

James M. MacDonald and Michael E. Ollinger, Amer.

J. Agr. Econ. 82 (May 2000) pp. 334-346.) 

Pork and Poultry : Vertically Coordinated Industries
Higher Production and Exports

Poultry (broiler, turkey, and other chicken) output

remained strong in 2000, expanding by 2.4 percent

compared with 1999, to a volume of 36 billion pounds.

Domestic consumption rose by only 1 percent, while a

9-percent increase in exports (mostly dark meat parts)

absorbed the increase in production. The 2000 retail

poultry price index (measured by the Bureau of Labor

Statistics) increased by 1.2 percent. Poultry production

is expected to rise by 1 percent in 2001 due to continued low feed costs and increased export sales. 

Broilers: Exports Continue To Rise

During 2000, broiler production rose by 2.5 percent

compared with the previous year, to 30.5 billion

pounds (fig. 1). The increased production was

absorbed by higher exports. Since exports are primarily dark meat, large amounts of higher priced breast

meat were available for domestic consumption.

Discounts at the wholesale level to market the

increased quantity of breast meat pressured wholesale

prices for breast meat per capita and lowered wholesale prices for whole birds as well. The decline in

wholesale prices was not fully reflected in lower net

returns to producers because it was partially offset by

sustained low feed costs. Wholesale whole broiler

prices declined by 3.3 percent in 2000, to 56.20 cents

per pound, while the composite retail prices for chicken rose slightly, widening the wholesale-to-retail price

spread (fig. 5). In 2001, broiler production is expected

to expand more slowly as producers continue to

respond to the low wholesale prices in 2000. However,

wholesale broiler prices are expected to be 5 percent

higher in 2001, as per capita supplies will likely be

slightly lower than they were in 2000. Exports of 5.5

billion pounds accounted for almost one-fifth of U.S.

broiler production in 2000 (fig. 3) and are expected to

continue increasing their share of production in 2001.

Russia and Hong Kong accounted for almost half of

U.S. broiler exports. Exports to Latvia and Estonia

declined by 55 percent, but this was offset by large

increases to Russia, Hong Kong, and Singapore. The

large increase in exports to Russia and the decline to

Latvia and Estonia occurred because Russia restricted

transshipments through the Baltic States, diverting

poultry shipments directly to Russian ports. Also,

Economic Research Service, USDA 7

Poultry

Exports of U.S. poultry and pork to Russia have

grown dramatically since economic reform in that

country began in 1992. As detailed in an article by

S. Osborne, (Prospects for U.S. Poultry and Pork

Exports, Livestock, Dairy, and Poultry Situation and

Outlook, LPD-M-80, Feb. 28, 2001, http://www.ers.

usda.gov/publications/so/view.asp?f=livestock/ldpmbb/) future exports to Russia will depend upon the

ruble exchange rate, consumer incomes, oil prices,

and competitors’ trade policies. The outlook for

these four factors is generally positive, pointing to

favorable conditions for U.S. poultry exports to

Russia. In addition, the outlook for U.S. pork

exports to Russia is more favorable than it has been

in the past because of suspension of export subsidies on pork by the EU, the major exporter of pork

to Russia. Accordingly, future U.S. pork exports to

Russia should show modest gains.

Exports of Poultry and Pork to Russia

Are Potentially Favorable

Figure 5

Wholesale turkey prices up, while broiler prices

down in 2000

2001 forecast from August World Agricultural Supply and 

Demand Estimates, USDA.

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1992 1995 1998 2001F

$ per lb

Wholesale broiler

Wholesale turkey

Retail chicken

Retail turkey
exports to Mexico and Canada increased by 22 and 16

percent, respectively, due to a combination of favorable

prices and strong economic growth in both countries.

Turkey: Production Increases and Exports

Rise, While Prices Decline in 2001

Turkey production in 2000 totaled 5.4 billion pounds,

about 2 percent higher than the previous year (fig. 1).

Wholesale turkey prices continued to rise as domestic

per capita supplies were reduced by increased exports

and lower carryover stocks. Wholesale prices averaged

70.5 cents per pound, up 2 percent compared with

1999, while retail prices increased almost 4 percent

(fig. 5). While both prices went up, the wholesale-toretail price spread widened to 26 cents per pound. The

price increases, due largely to a 21-percent growth in

exports, are expected to spur an increase in turkey production of 2 percent in 2001. Wholesale turkey prices

are forecast to fall 4 percent in 2001. 

U.S. turkey exports in 2000 were 458 million pounds

and accounted for 9 percent of total production (fig.

3). Turkey exports to Mexico grew 14 percent over the

previous year and equaled half of U.S. turkey exports.

Shipments increased due to the growth in the Mexican

economy. Mexico imports mostly ground turkey and

Mechanically De-boned Meat (MDM) turkey that is

used mainly in sausage production. Shipments of

turkey to Russia, our second largest export market,

nearly tripled compared with 1999, accounting for

almost 12 percent of U.S. turkey exports. Exports to

Hong Kong in 2000 were 43 million pounds, up 28

percent and were 9 percent of U.S. turkey exports. It is

expected that 2001 turkey exports will grow by 7 percent, with additional exports to Mexico accounting for

most of this increase.

Eggs: Demand Increased in 2000

U.S. egg production, table and hatching, totaled 7 billion dozen in 2000, almost 2 percent higher than the

previous year, with similar levels of growth expected

in 2001 (fig. 1). Table eggs accounted for 85 percent

of total production. Wholesale table egg prices averaged 68.9 cents per dozen, up 5 percent over 1999,

while retail egg prices decreased by the same percentage, narrowing the wholesale-to-retail price spread

(fig. 6). Wholesale prices were below a year earlier for

most of 2000, but increased substantially in the fourth

quarter when per capita supplies were below the previous year. Eggs were used by retailers as “loss leaders”

during the fourth quarter holidays, keeping retail

prices low even as wholesale prices rose. Per capita

egg consumption rose slightly to 258.3, due to

increased demand in the breaking egg market for commercial baking, confections, and the fast food industry.

Wholesale table egg prices are expected to rise by 2

percent in 2001.

U.S. egg exports in 2000 were 172 million dozen and

accounted for 2 percent of production (fig. 3). Table

eggs accounted for just over half of total U.S. egg

exports. Japan, Canada, Mexico, and Hong Kong were

the largest export markets, receiving nearly three-quarters of U.S. egg exports. The gain in exports to Hong

Kong, Japan, and the EU offset the 14-percent decline

in exports to Canada. Strong competition from China

in the Hong Kong market is expected to limit export

growth for U.S. eggs in 2001.

For more information on the poultry industry contact

David Harvey, 202-694-5177, djharvey@ers.usda.gov.

8 Economic Research Service, USDA

Figure 6

Wholesale table egg prices continue recovery

of last couple years

0.4

0.6

0.8

1.0

1.2

1992 1995 1998 2001F

$ per dozen

2001 forecast from August World Agricultural Supply and 

Demand Estimates, USDA. 

Wholesale price

Retail price
Increased Production, Higher Retail

Prices, Yet Lower Prices Paid to Farmers

In 2000; Milk Farm Prices Show Recovery

In 2001

Milk production rose to 167.7 billion pounds in 2000

(fig. 7), up by 3 percent compared with 1999 (fig. 1).

While the number of milk cows rose slightly, milk per

cow grew by 2.3 percent, to 18,532 pounds. The milkper-cow gain was boosted by higher forage quality and

heavier concentrate feeding in the dairy industry. Milk

production is projected to slip slightly in 2001. Major

factors in this decline are the relatively low returns

during 2000, as well as weather and forage quality

problems that occurred during winter 2001. Milk per

cow is projected to recover by late 2001. In addition,

milk cow numbers are expected to decline because of

the continued exit of dairy farmers and slower expansion of financially stronger operations.

Strong demand for cheese and butter and the decline in

milk production are expected to return 2001 farm milk

prices to the levels of the late 1990s (fig. 8). Farm

milk prices for 2000 averaged $12.34 per hundredweight, down 14 percent from a year earlier and the

lowest since 1991. The 2000 retail price index for all

dairy products (measured by the Bureau of Labor

Statistics) increased by less than 1 percent following

more substantial rises the two previous years.

Compared with 1999, the 2000 farm-to-retail price

spread rose substantially due to the decline in farm

prices at the same time that retail prices remained relatively steady.

Commercial use in 2000 expanded by about 3 percent

on a milkfat basis and 2 percent on a skim-solids

basis. While demand for butter, cheese, and fluid

cream grew, demand for fluid milk and perishable,

manufactured dairy products declined slightly.

Moreover, the use of skim solids as an ingredient in

processed food has continually declined since the late

nineties. This decline is due to reduced demand for

nonfat foods and increased use of imported milk protein concentrates. Government removals of nonfat dry

milk under the milk price support program

(http://www.ers.usda.gov/publications/AIB761/)

increased by 28 percent compared with 1999, as Dairy

Export Incentive Program (DEIP) exports fell by more

than half and price support purchases more than doubled (http://www.fas.usda.gov/excredits/deip.html).

While net removals on a milk equivalent, milkfat

basis, totaled less than 1 billion pounds, removals on a

skim-solids basis totaled about 9 billion pounds. With

the domestic milkfat markets tight during most of

2000, butter was not available for export through 

the DEIP. 

International market supplies of nonfat dry milk could

not keep pace with rising world demand in 2000,

which increased international prices by 42 percent

Economic Research Service, USDA 9

Dairy

Figure 7

Milk production surged in 2000

Billion lb

2001 forecast from August World Agricultural Supply and 

Demand Estimates, USDA.

140

145

150

155

160

165

170

1992 1995 1998 2001F

Figure 8 

Farm milk prices bounce back in 2001

10

12

14

16

1992 1995 1998 2001F

2001 forecast from August World Agricultural Supply and 

Demand Estimates, USDA.

$ per cwt
over 1999. Strong nonfat dry milk prices were supported by improved Asian demand, coupled with smaller

than expected export supplies from Oceania. On 

the other hand, the international butter market was

depressed during much of 2000, with prices declining

by 9 percent compared with the previous year.

This was mostly due to a decrease in Russian 

butter imports.

For more information on the dairy industry contact

James Miller, 202-694-5184, jjmiller@ers.usda.gov.

10 Economic Research Service, USDA

International dairy trade, accounting for about 5 percent of world milk production, is confined mostly to

manufactured products such as butter, cheese, dry

milk powders, and whey. Despite the elimination of

many of the non-tariff barriers affecting international

dairy trade negotiated during the Uruguay Round of

the General Agreement on Tariffs and Trade (GATT),

standardization of tariff-rate quotas (TRQ), export

subsidies, and import access still remain as issues to

be addressed under the World Trade Organization

(WTO). For more information see the analysis of the

international dairy markets and the WTO by Blayney

and Miller (International Dairy Markets and the

WTO, Livestock, Dairy, and Poultry Situation and

Outlook, LDP-M-74, August 29, 2000, http://www.

ers.usda.gov/publications/so/view.asp?f=livestock/ldp

-mbb/).

International Dairy Markets and the World Trade Organization
Lamb and Mutton Production Lower,

Imports Increase To Meet Demand

In 2000, the U.S. sheep industry continued to decline, a

trend expected to persist in 2001 (fig. 9). U.S. commercial production of lamb and mutton in 2000 was 230

million pounds, down almost 6 percent from 1999. On

the other hand, 2000 lamb prices averaged $79.40 per

hundredweight, about 5 percent above a year earlier and

the highest level since 1998. Prices are expected to

remain about the same in 2001. With per capita consumption constant in 2000, lamb and mutton imports

increased by 14 percent to offset the decrease in domestic supply. Imports in 2000, mostly from Australia and

New Zealand (major exporters of high quality lamb

cuts), represented just over a third of total consumption.

Increasing ethnic diversity in the U.S. population provided a niche market for the lamb and mutton industries, particularly among Middle Eastern, African, Latin

American, and the Caribbean ancestry groups. 

In July 1999, the United States imposed a 3-year tariff-rate quota (TRQ) on lamb meat imports. A panel

from the World Trade Organization (WTO) recommended, in December 2000, that the United States

bring its import safeguard measures on lamb meat (the

TRQ) into conformity with its WTO obligations, as a

result of a complaint filed by New Zealand and

Australia in October 1999. The United States appealed

the ruling but lost the appeal. The United States has

settled the WTO dispute with Australia and New

Zealand and will end its TRQ safeguard on November

15, 2001. Imports in 2001 are expected to continue

increasing to satisfy the fairly stable demand.

For more information on the sheep industry contact

Keithly Jones, 202-694-5172, kjones@ers.usda.gov.

Economic Research Service, USDA 11

Sheep

Figure 9 

Lamb and mutton production continues 

long-term decline, while imports climb

Million cwt

0

100

200

300

400

500

600

1970 80 90 2000

0

5

10

15

20

25 Lamb & mutton production

Imports

Sheep & lamb inventory

Commercial production. 2001 forecast,

Economic Research Service, USDA.

Inventory

Million head