1

Livestock Outlook

Gary BresterMSU Department of Agricultural Economics and Economics

Agriculture Outlook 2008:Farm Bill, Wind Energy & Climate Change

November 14, 2008Bozeman, MT

2

OUTLINE

1. Cattle Production/Prices

2. Trade Situation

3. Domestic Demand

4. Cattle Outlook

3

OUTLINE

1. Cattle Production/Prices

2. Trade Situation

3. Domestic Demand

4. Cattle Outlook

4

“US Beef Production” vs.Cattle Inventory (January 1)

16182022242628

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

90100110120130140

Cattle Inventory "U.S. Beef Production"

Bil. Pounds Mil. Head

Source: Livestock Marketing Information Center & MSU Agricultural Marketing Policy Center

5

Productivity of U.S. Beef CowBreeding Herd

Carcass Weight Pounds Per Beef Cow, Annual

400

450

500

550

600

650

700

750

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

Lbs

Source: Livestock Marketing Information Center & MSU Agricultural Marketing Policy Center

6

Nominal Fed AndFeeder Cattle Prices

Source: Livestock Marketing Information Center & MSU Agricultural Marketing Policy Center

Nebraska Direct 1100-1300 lb Choice SteersMontana 500-600 lb Steers

020406080

100120140

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

Fed Cattle Feeder Cattle

$/cwt

7

Real Fed And Feeder Cattle Prices

Source: Livestock Marketing Information Center & Economic Report of the President (2000=100)

Nebraska Direct 1100-1300 lb Choice SteersMontana 500-600 lb Steers

50

70

90

110

130

150

170

190

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

Real Fed Cattle Real Feeder Cattle

$/cwt

8

Productivity of U.S. Beef CowBreeding Herd

Carcass Weight Pounds Per Beef Cow, Annual

400

450

500

550

600

650

700

750

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

Lbs

Source: Livestock Marketing Information Center & MSU Agricultural Marketing Policy Center

9

OUTLINE

1. Cattle Production/Prices

2. Trade Situation

3. Domestic Demand

4. Cattle Outlook

10

U.S. Beef, Veal and LiveAnimal Imports

Annual, Billion Lbs, Carcass Weight Basis

0

1

2

3

4

5

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

Total Canada Mexico

Billion Lbs

Source: Livestock Marketing Information Center & MSU Agricultural Marketing Policy Center

11

Beef and Beef From Live CattleImports as a Percentage of U.S. Supply

02468

1012141618

1974

1976

1978

1980

1982

1984

1986

1988

*

1990

1992

1994

**

1996

1998

2000

2002

2004

2006

Cattle & Beef Beef

Percent

Source: Livestock Marketing Information Center & MSU Agricultural Marketing Policy Center

*CUSTA **NAFTA

12

U.S. Beef, Veal and LiveAnimal Exports

Annual, Billion Lbs, Carcass Weight Basis

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

1974

1976

1978

1980

1982

1984

1986

1988

*19

9019

9219

94**

1996

1998

2000

2002

2004

2006

Total

Billion Lbs

Source: Livestock Marketing Information Center & MSU Agricultural Marketing Policy Center

*CUSTA **NAFTA

13

U.S. Beef/Live Animal Exports As A Percentage of U.S. Beef Supply

0

2

4

6

8

10

1974

1976

1978

1980

1982

1984

1986

1988

*19

9019

9219

94**

1996

1998

2000

2002

2004

2006

Percent

Source: Livestock Marketing Information Center & MSU Agricultural Marketing Policy Center

*CUSTA **NAFTA

14

Value of U.S. Beef, Veal andLive Animal, By-Product Net

Imports/Exports

-2,500-2,000-1,500-1,000

-5000

5001,0001,5002,0002,500

1982

1985

1988

*

1991

1994

**

1997

2000

2003

2006

Total

Million $

Source: Livestock Marketing Information Center & MSU Agricultural Marketing Policy Center

*CUSTA **NAFTA

15

OUTLINE

1. Cattle Production/Prices

2. Trade Situation

3. Domestic Demand

4. Cattle Outlook

16

Demand for Fed CattleU.S. Fed Steer Price vs. U.S. Beef SupplyU.S. Fed Steer Price vs. U.S. Beef Supply

Pric

e ($

/cw

t)

Beef Supply (billion lbs)24 25 27 2826 29 31

60

70

75

80

65

90

919293

94

9596 97

98 99

0100 02

30

?

0304

0585

90

95

06

070809

17

Demand for Fed CattleU.S. Fed Steer Price vs. U.S. Beef SupplyU.S. Fed Steer Price vs. U.S. Beef Supply

Pric

e ($

/cw

t)

Beef Supply (billion lbs)24 25 27 2826 29 31

60

70

75

80

65

90

919293

94

9596 97

98 99

0100 02

30

?

0304

0585

90

95

06

0708

09??

18

U.S. Demand for Beef

Source: James Mintert, Kansas State University

0102030405060708090

10019

80

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

Choice Retail Beef Demand Index (1980=100)

Inde

x Va

lue

19

U.S. Demand for Beef

Source: James Mintert, Kansas State University

-3.8-5.3

-3.3-1.6 -1.8 -2.1

-5.9

0.2

3.8 3.2

5.5

-1.8

5.5

8.6

-3.2

-6.6

1.8

-5-8-6

-4-2

0

24

6

8

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Annual Percentage Change in Beef Demand

Bee

f Dem

and

Cha

n ge

(%)

20

OUTLINE

1. Cattle Production/Prices

2. Trade Situation

3. Domestic Demand

4. Cattle Outlook

21

Cattle And Corn Prices

0

20

406080

100

120

140160

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Dol

lars

per

cw

t

0.0

1.0

2.03.04.0

5.0

6.0

7.08.0

Dol

lars

per

bus

hel

NE 1100-1300 Steers MT 600-700 Steers US Corn

Sources: LMIC and NASS

22

Impact Of Corn PricesOn Cattle Prices

1. Price correlation between

a. Corn and fed steers is 0.30

2. A 10% decrease in corn price

a. Decrease fed cattle price by 0.6% Increased fed cattle weights

b. Increases feeder cattle prices by 2%

23

Impact Of Fed Cattle PricesOn Feeder Cattle Prices

1. The major factor in feeder cattle prices is fed cattle price

a. Correlation of 0.83b. Fed cattle price declines by 1%,

feeder cattle decline by 1.5%c. A $10/cwt decline in fed cattle

reduces feeder cattle by about $15/cwt

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2009 Cattle Prices1. U.S. beef production is forecast to be level in 2008/2009

a. Cattle numbers remain low2. Economic conditions important3. Domestic demand likely to decline4. International markets?5. April 2010 fed cattle trading at $0.91/lb6. September 09 futures $1.02/lb

a. Suggests $1.06/lb for MT calves

25

QUESTIONS?

Picture Courtesy of Clint Peck