Ethanol-driven feed costs cut US meat output-USDA

By Charles Abbott

WASHINGTON (Reuters) - High feed costs, created by the explosive growth of the fuel ethanol industry, will lower U.S. beef and broiler chicken output this year by a quarter billion lbs from earlier forecasts, the U.S. government said on Friday.

The Agriculture Department also said freeze damage would cut the Florida orange crop by 6 percent and California's by 20 percent from a month ago. A drop-off in cotton exports will create the largest year-end surplus in 21 years, 8.8 million bales weighing 480 lbs each.

The Agriculture Department said beef output would dip by 62 million lbs and chicken by 124 million lbs from last month's estimate, with total red meat and poultry production forecast for 90.359 billion lbs. Cattle, hog and poultry feeders say abrupt increases in feed costs -- predominantly corn -- are squeezing their operations.

Producers will send fewer animals to slaughter and at lower prices this year, said USDA. Both are ways to use less feed. Corn prices have doubled since last fall. The ethanol industry is expected to use 2.15 billion bushels of the 2006 corn crop and 3.2 billion bushels of this year's crop.

"The decline in beef carcass weights reflects several factors, including higher feed costs, harsh winter weather and higher-than-expected first quarter beef slaughter," said USDA. Based on low slaughter numbers in January, broiler output was expected to fall in the first half of this year but rebound in the final half.

It was the second month in a row that USDA lowered its forecast for beef and broiler production in 2007. In February, it reduced its beef estimate by 60 million lbs, saying "relatively high grain prices will encourage cattle to remain on grass longer" and result in lower beef production. USDA shaved its broiler forecast by 163 million lbs because fewer chicks were being hatched.

Brazil and Argentina are forecast to grow record corn (maize) crops in 2006/07, said USDA. It pegged Brazil's crop at 48 million tonnes, up 2 million tonnes from February, and Argentina's at 21.5 million tonnes, up 500,000 tonnes from last month.

USDA estimated Brazil's soybean crop at a record 57 million tonnes, up 1 million tonnes from its February estimate.