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1
Cattle Outlook 2011 and Beyond
Shane EllisExtension Livestock Economist
Iowa State University
August 16, 2011
2
Beef Situation• Extremely volatile cattle prices
• Demand and the economy
• Exports up
• Industry still in retraction, cow herd declining
• Beef production to decline slightly in 2011
• More COF, fewer placements in 4th quarter
• Profit outlook had been mixed, but remains tight
3
Beef Supply Summary2010•Total Beef Production: +1.3%•Total Slght +2.7%, wts -1.4%
2011•Total Beef Production: -0.6%•Total Slght -1.4%, wts +0.9%
2012 •Total Beef Production -3.8%
4
January 2011 Cattle ReportMillion head
Change from 2010
All cattle 92.6 -1.4%
Beef cows 30.9 -1.6%
Beef replacement heifers 5.2 - 5.4%
Milk cows 9.1 +0.7%
Milk replacement heifers 4.6 +0.7%
Other heifers 9.8 +0.5%
2010 Calf crop 35.7 - 0.7%
Cattle on Feed 14.0 +2.8%
5
July 2011 Cattle ReportMillion head
Change from 2010
All cattle 100.0 -1%
Beef cows 31.4 -1%
Beef replacement heifers 4.2 - 5%
Milk cows 9.2 +1%
Milk replacement heifers 4.2 +4%
Other heifers 7.6 -2%
2011 Calf crop 35.5 - 1%
Cattle on Feed 12.2 +3%
6
JANUARY 1 TOTAL CATTLE INVENTORYU.S., Annual
70
80
90
100
110
120
130
140
1951 1956 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011
Mil. Head
C-N-0101/28/11
-1.4 Percent2011 = 92.6 Million Head
Livestock Marketing Information Center
Data Source: USDA-NASS
7
BEEF COWS THAT HAVE CALVEDJANUARY 1, 2011
(1000 Head)
880 to 5,030 (12)450 to 880 (11)160 to 450 (13)
0 to 160 (14)
C-N-1501/28/11
659Alaska
Hawaii
US Total
5.1
180 928
600727
CT 4
DE 3.5
926
502
79
446
352213
840
1478 1023
461
13
MD 42
MA 699
360
495
1865
1476
1772237
NJ 9
488
90
351
880
290
2036
549
157RI 1.5
184
1610
990
5025
333
VT 10
675
233
200
265
694
30865
Livestock Marketing Information Center
Data Source: USDA/NASS
NH 3
8
CHANGE IN BEEF COW NUMBERSJANUARY 1, 2002 TO JANUARY 1, 2011
(1000 Head)
3 to 100 (8)-12 to 3 (16)-70 to -12 (13)
-410 to -70 (13)
C-N-2901/28/11
Alaska
Hawaii
US Total
-911
-5 1
-160-70
CT -4
DE -1
-32
-92
1
-47
-93 -13
-26 -52
-5
3
MD 1
MA -128
-40
-81
-195
5
-160-3
-1
NJ 1
-12
15
-83
-128
10
100
-56
RI 0
-26
-193
-70
-410
-24
-2
-15
-20
1
35
-121
-2269
Livestock Marketing Information Center
Data Source: USDA/NASS
-145 5
9
Building the Cow Herd
• Location
• Resources
• Capital
• Producer Interest (i.e. enthusiasm, youth)
• Profitable Outlook
10
COW-CALF RETURNS AND CATTLE INVENTORY
U.S., Annual
-100
-50
0
50
100
150
1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
$ Per Cow
90
95
100
105
110
115
Mil. Head
Cow-CalfReturns
CattleInventoryJan 1
Livestock Marketing Information Center
Data Source: USDA-AMS & USDA-NASS, Compiled & Analysis by LMIC
11
Data Source: USDA-NASS, Compiled and Forecasts by LMIC
Yr/yr %
Prd & Con
1.3 & -2.5
-0.6 & -2.8
-3.8 & -2.4
12
July Cattle on feed up 4% 10.5 million Aug Cattle on feed up 6-8% Record placements?
CATTLE ON FEEDUS Total, Monthly
9.5
10.0
10.5
11.0
11.5
12.0
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Mil. Head
Avg.2005-2009
2010
2011
13
Cattle Price & Beef Demand
• Fed cattle prices up 10+%
• Feeder cattle prices up 20+%
• Domestic & foreign demand strong
• Consumer preferences, steak vs. ground
• Tight choice-select spread
14
SLAUGHTER STEER PRICES5 Market Weighted Average, Weekly
80
85
90
95
100
105
110
115
120
125
JAN APR JUL OCT
$ Per Cwt.
Avg.2005-09
2010
2011
Livestock Marketing Information Center
Data Source: USDA-AMS
15
MED. & LRG. #1 FEEDER STEER PRICES700-800 Pounds, Southern Plains, Weekly
90
100
110
120
130
140
150
JAN APR JUL OCT
$ Per Cwt.
Avg.2005-09
2010
2011
C-P-4908/08/11Livestock Marketing Information Center
Data Source: USDA-AMS, Compiled & Analysis by LMIC
16
MED. & LRG. #1 STEER CALF PRICES400-500 Pounds, Southern Plains, Weekly
115
125
135
145
155
165
175
JAN APR JUL OCT
$ Per Cwt.
Avg.2005-09
2010
2011
C-P-49A08/08/11Livestock Marketing Information Center
Data Source: USDA-AMS, Compiled & Analysis by LMIC
17
SLAUGHTER COW PRICESSouthern Plains, 85-90% Lean, Weekly
40
45
50
55
60
65
70
75
80
85
JAN APR JUL OCT
$ Per Cwt.
Avg.2005-09
2010
2011
C-P-3507/18/11Livestock Marketing Information Center
Data Source: USDA-AMS
18
BEEF COW SLAUGHTERFederally Inspected, Weekly
45
50
55
60
65
70
75
80
85
90Thou. Head
Avg.2005-09
2010
2011
C-S-3408/12/11Livestock Marketing Information Center
Data Source: USDA-AMS & USDA-NASS
up 11% in 2010
19
WHOLESALE BONELESS BEEF PRICESFresh, 90% Lean, Weekly
120
130
140
150
160
170
180
190
200
210$ Per Cwt.
Avg.2005-09
2010
2011
M-P-2408/08/11Livestock Marketing Information Center
Data Source: USDA-AMS
20
WHOLESALE BEEF RIBEYE PRICESBoneless, Light, Weekly
400
450
500
550
600
650
700
750$ Per Cwt.
Avg.2005-09
2010
2011
M-P-2108/08/11Livestock Marketing Information Center
Data Source: USDA-AMS
21
CHOICE MINUS SELECT BEEF PRICESCarcass Cutout Value 600-900 Lbs., Weekly
0
2
4
6
8
10
12
14
JAN APR JUL OCT
$ Per Cwt.
Avg.2005-09
2010
2011
C-P-6808/08/11Livestock Marketing Information Center
Data Source: USDA-AMS, Compiled & Analysis by LMIC
22
ANNUAL AVERAGE CATTLE PRICESSouthern Plains
55
65
75
85
95
105
115
125
135
145
155
1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
$ Per Cwt
500-600lbSteerCalves
700-800lbFeederSteers
FedSteers
C-P-0608/01/11Livestock Marketing Information Center
Data Source: USDA-AMS, Compiled & Analysis by LMIC
23
U S BEEF AND VEAL EXPORTSCarcass Weight, Annual
0.0
0.5
1.0
1.5
2.0
2.5
3.0
1987 1990 1993 1996 1999 2002 2005 2008 2011
Bil. Pounds
I-N-0607/26/11Livestock Marketing Information Center
Data Source: USDA-ERS & USDA-FAS, Compiled & Analysis by LMIC
+17% in 2010
24
U S BEEF AND VEAL EXPORTSCarcass Weight, Monthly
70
95
120
145
170
195
220
245
270
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Mil. Pounds
Avg.2005-09
2010
2011
I-N-1606/10/11Livestock Marketing Information Center
Data Source: USDA-ERS & USDA-FAS
25
TOTAL U.S. EXPORTS OF BEEF MUSCLE CUTS
Weekly
4
6
8
10
12
14
16
18
20
22
Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11
1000 MT
08/11/11Livestock Marketing Information Center
Data Source: USDA-FAS
26
U S BEEF EXPORTS TO MAJOR MARKETSCarcass Weight, Monthly
0
10
20
30
40
50
60
70
80
90
100
2003 2004 2005 2006 2007 2008 2009 2010 2011
Mil. Pounds
Japan
Canada
Mexico
SouthKorea
I-N-3507/13/11Livestock Marketing Information Center
Data Source: USDA-ERS & USDA-FAS
27
U S BEEF EXPORTS TO JAPANCarcass Weight, Monthly
5
10
15
20
25
30
35
40
45
50
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Mil. Pounds
Avg.2005-09
2010
2011
I-N-3707/13/11Livestock Marketing Information Center
Data Source: USDA-ERS & USDA-FAS
28
Profitability
• Profitability in 2011, substantial but brief
• Feed and feeder cattle prices keep pressure on margins
• Profitability in cattle feeding = margin risk management
29
30
31
32
OMAHA CORN PRICESWeekly
2.50
3.50
4.50
5.50
6.50
7.50
8.50$ Per Bu.
Avg.2005-09
2010
2011
G-P-0208/11/11Livestock Marketing Information Center
Data Source: USDA-AMS
33
Cattle Crush MarginReturn over corn and feeder cost considering basis adjusted futures
and• Live weight 1250 pounds• Feeder weight 750 pounds• Corn 50 bushels
Farms differ, but approximately a $150 margin is needed to breakeven
www.econ.iastate.edu/margins
34
Yearling Cattle Crush Margin ($/Head) by Sale Month
Cattle on Feed: Cash Feeder and Corn Price at Placement and
Wednesday Live Cattle Futures Prices
35
Cattle Summary
• Demand connected with the economy
• Demand added support to prices in 2010
• Beef production declining until 2015+
• Profitability in first quarter of year– Losses in second half of year
• Fed cattle price forecast $112-120/cwt
36
Thank you
Questions?
Shane Ellis
shanee@iastate.edu
www.econ.iastate.edu/ifo
www.econ.iastate.edu/margins
515-294-8030
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