vs. BEEF COW INVENTORY Mil. Head BEEF PRODUCTION Mil. Head Bil… · 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Bil. Pounds Turkey Chicken Lamb & Veal Pork Beef

12/13/2011

1

Current Economic Climate

of the Cattle Business

Derrell S. Peel

Breedlove Professor of Agribusiness and

Extension Livestock Marketing Specialist

Oklahoma State University

Current Economic Climate

• Short and Medium Term

– Current market situation

– Industry and external factors

• Long Term

– Industry structural change

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-01

01/28/11

-1.4 Percent

2011 = 92.6 Million Head

Livestock Marketing Information Center

Data Source: USDA-NASS

BEEF PRODUCTION

vs. BEEF COW INVENTORYInventory on January 1, U.S.

28

30

32

34

36

38

40

1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Mil. Head

22

23

24

25

26

27

28

Bil. Pounds

Commercial Beef Production

Beef Cow Inventory (left axis)

2012 Projected. Compiled from USDA data with analysis by the Livestock Marketing Information Center and Derrell Peel

Current Market Situation

• Global

• U.S. Economy

• Agriculture

• Cattle Industry

Major Market Factors

• Cattle Inventory and Beef Production

• Beef Demand

• International Trade

• Feed and Input Markets

• Forage Conditions

12/13/2011

2

BOXED BEEF CUTOUT VALUEChoice 600-900 Lbs. Carcass, Weekly

135

145

155

165

175

185

195

JAN APR JUL OCT

$ Per Cwt.

Avg.2005-09

2010

2011

C-P-62

11/07/11Livestock Marketing Information Center

Data Source: USDA-AMS

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



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-49


Data Source: USDA-AMS, Compiled & Analysis by LMIC

MED. & LRG. #1 STEER CALF PRICES500-600 Pounds, Southern Plains, Weekly

100

110

120

130

140

150

160

170

JAN APR JUL OCT

$ Per Cwt.

Avg.2005-09

2010

2011

C-P-54



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-35



BOXED COW-BEEF CUTOUT VALUECutter Cow, Weekly

100

110

120

130

140

150

160

170

JAN APR JUL OCT

$ Per Cwt.

Avg.2005-09

2010

2011



12/13/2011

3

Beef Cow Slaughter Federally Inspected

45.0

50.0

55.0

60.0

65.0

70.0

75.0

80.0

85.0

90.0

95.0

1 9 17 25 33 41 49

Th

ou

san

d H

ead

Week

2011 2010 5 yr ave

Region 6 includes Texas, Oklahoma, Arkansas, Louisiana, New Mexico

Beef Cow Slaughter, National minus Region 6 Federally Inspected

35.0

40.0

45.0

50.0

55.0

60.0

65.0

1 9 17 25 33 41 49

Th

ou

san

d H

ead

Week

2011 2010 5 yr ave


Region 6 Beef Cow Slaughter Federally Inspected

5.0

10.0

15.0

20.0

25.0

30.0

1 9 17 25 33 41 49

Th

ou

san

d H

ead

Week

2011 2010 5 yr ave


CHOICE MINUS SELECT BEEF PRICESCarcass Cutout Value 600-900 Lbs., Weekly

0

2

4

6

8

10

12

14

16

18

20

JAN APR JUL OCT

$ Per Cwt.

Avg.2005-09

2010

2011

C-P-68



http://www.cpc.ncep.noaa.gov/products/expert_assessment/season_drought.gif

12/13/2011

4

WHOLESALE BEEF RIBEYE PRICESBoneless, Light, Weekly

400

450

500

550

600

650

700

750

800

JAN

APR

JUL

OCT

$ Per Cwt.

Avg.2005-09

2010

2011

M-P-21



WHOLESALE BEEF FULL TENDER PRICESMusl-On, 5 Pounds and Up, Weekly

600

650

700

750

800

850

900

950

1000

1050

1100

JAN

APR

JUL

OCT

$ Per Cwt.

Avg.2005-09

2010

2011

M-P-23



WHOLESALE BEEF CHUCK PRICESBoneless 2 Piece, Weekly

125

145

165

185

205

225

245

JAN

APR

JUL

OCT

$ Per Cwt.

Avg.2005-09

2010

2011



WHOLESALE BEEF BOTTOM ROUND PRICES18-33 Pounds, Weekly

125

135

145

155

165

175

185

195

205

215

225

JAN

APR

JUL

OCT

$ Per Cwt.

Avg.2005-09

2010

2011

M-P-22



WHOLESALE BONELESS BEEF PRICESFresh, 90% Lean, Weekly

120

130

140

150

160

170

180

190

200

210

JAN

APR

JUL

OCT

$ Per Cwt.

Avg.2005-09

2010

2011

M-P-24



WHOLESALE BONELESS BEEF PRICESFresh, 50% Lean, Weekly

50

60

70

80

90

100

110

120

130

JAN

APR

JUL

OCT

$ Per Cwt.

Avg.2005-09

2010

2011

M-P-25



12/13/2011

5

COMMERCIAL BEEF PRODUCTIONQuarterly

5.6

5.8

6.0

6.2

6.4

6.6

6.8

7.0

JAN-MAR APR-JUN JUL-SEP OCT-DEC

Bil. Pounds

Avg.2006/010

2010

2011

2012

2013

M-S-01


Data Source: USDA-NASS, Compiled & Analysis by LMIC

WHOLESALE HAM PRICESSelected, 23-27 Pounds, Weekly

45

55

65

75

85

95

105

JAN

APR

JUL

OCT

$ Per Cwt.

Avg.2005-09

2010

2011

M-P-27



WHOLESALE PORK LOIN PRICES1/4 Inch Trim, 21 Pounds and Down-Light, Weekly

85

95

105

115

125

135

145

155

165

JAN

APR

JUL

OCT

$ Per Cwt.

Avg.2005-09

2010

2011

M-P-28



WHOLESALE PORK BELLY PRICESPrimal Cutout Value, Weekly

70

80

90

100

110

120

130

140

150

160

170

JAN

APR

JUL

OCT

$ Per Cwt.

Avg.2005-09

2010

2011

M-P-29



WHOLESALE CHICKEN BREAST PRICESSkinless/Boneless, Northeast, Truckload, Weekly

100

110

120

130

140

150

160

170

180

190

JAN

APR

JUL

OCT

Cents Per Pound

Avg.2005-09

2010

2011

P-P-02



WHOLESALE CHICKEN WING PRICESNortheast, Truckload, Weekly

65

80

95

110

125

140

155

170

185

JAN

APR

JUL

OCT

Cents Per Pound

Avg.2005-09

2010

2011

P-P-07



12/13/2011

6

WHOLESALE CHICKEN LEG PRICESNortheast, Truckload, Weekly

45

50

55

60

65

70

75

JAN

APR

JUL

OCT

Cents Per Pound

Avg.2005-09

2010

2011

P-P-03



BROILER CHICKS PLACEDWeekly

145

150

155

160

165

170

175

180

JAN

APR

JUL

OCT

Mil. Birds

Avg.2005-09

2010

2011

P-S-11



Total Meat Supplies Down in 2012

2011 2012

• Beef ↓0.25% ↓3.5%

• Pork ↑1.5% ↑0.5%

• Broilers ↑0.8% ↓2.5%

• Total Meat ↑0.8% ↓1.9%

COMMERCIAL MEAT & POULTRY

PRODUCTIONBy Type of Meat, Annual

0

10

20

30

40

50

60

70

80

90

100

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Bil. Pounds

Turkey

Chicken

Lamb &Veal

Pork

Beef

M-S-03A



U S RED MEAT & POULTRY CONSUMPTIONPer Capita, Retail Weight, Annual

40

50

60

70

80

90

100

1988 1991 1994 1997 2000 2003 2006 2009 2012

Pounds

Beef

Pork

TotalChicken

M-C-01



U S BEEF AND VEAL EXPORTSCarcass Weight, Annual

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1988 1991 1994 1997 2000 2003 2006 2009 2012

Bil. Pounds

I-N-06


Data Source: USDA-ERS & USDA-FAS, Compiled & Analysis by LMIC

12/13/2011

7

MAJOR U S BEEF EXPORT MARKETSCarcass Weight, Annual

0

100

200

300

400

500

600

700

Japan Canada Mexico Korea

Mil. Pounds

Avg.2004/08

2009

2010

I-N-18



U S BEEF AND VEAL IMPORTSCarcass Weight, Annual

1.5

2.0

2.5

3.0

3.5

4.0

1988 1991 1994 1997 2000 2003 2006 2009 2012

Bil. Pounds

I-N-12



MAJOR U S BEEF IMPORT SOURCESCarcass Weight, Annual

0

200

400

600

800

1000

1200

Australia New Zealand Canada Argentina Mexico

Mil. Pounds

Avg.2004/08

2009

2010

I-N-36



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

South

Korea

I-N-35


Data Source: USDA-ERS & USDA-FAS

U S BEEF EXPORTS TO MAJOR MARKETSCarcass Weight, Monthly

0

10

20

30

40

50

60

70

80

90

2003 2004 2005 2006 2007 2008 2009 2010 2011

Mil. Pounds

Canada

Mexico

I-N-35


Data Source: USDA-ERS & USDA-FAS

EXCHANGE RATEUS Dollar base, Monthly

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Exchange Rate

Canada

Australia


Data Source: Pacific Exchange Rate Service, Univ. of B.C., Compiled & Analysis by LMIC

12/13/2011

8

STEER HIDE AND OFFAL VALUELive Animal Basis, Weekly

7.50

8.50

9.50

10.50

11.50

12.50

13.50

14.50

JAN APR JUL OCT

$ Per Cwt.

Avg.2005-09

2010

2011

C-P-39



JANUARY 1 FEEDER CATTLE SUPPLIESResidual, Outside Feedlots, U.S.

25

27

29

31

33

35

37

39

41

43

1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011

Mil. Head

C-N-30



FEEDLOT PLACEMENTSUS Total, Monthly

1.3

1.5

1.7

1.9

2.1

2.3

2.5

2.7

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Mil. Head

Avg.

2005-

09

2010

2011

C-N-08



FED CATTLE MARKETINGSUS Total, Monthly

1.6

1.7

1.8

1.9

2.0

2.1

2.2


Mil. Head

Avg.

2005-

09

2010

2011

C-M-11



CATTLE ON FEEDUS Total, Monthly

9.5

10.0

10.5

11.0

11.5

12.0


Mil. Head

Avg.

2005-

2009

2010

2011

C-N-10



U S BEEF COW INVENTORY

vs FI BEEF COW SLAUGHTERAnnual

30

31

32

33

34

35

36

1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Mil. Head

2.4

2.7

3.0

3.3

3.6

3.9

4.2

Mil. Head

Beef CowInventory

FI BeefCowSlaughter

C-S-28



12/13/2011

9

HEIFERS HELD AS BEEF

COW REPLACEMENTSJanuary 1, U.S.

4.0

4.5

5.0

5.5

6.0

6.5

7.0

1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011

Mil. Head

C-N-38

01/28/11

-5.4 %



Timelines: Next 10-20 Years

• Agriculture is Being Asked to Do More of Everything

• Long Term Structural Change – The industry we know today was built on cheap

energy and cheap feed

– We are unlikely to enjoy either of those in the future

• Change the Beef Industry from Grain Intensive to Forage Intensive

Resource Pressures in Agriculture

• More Competition Among Crops for Acres

• More Competition From Crops for Forage and Hay Production

• Regional Implications

OMAHA CORN PRICESWeekly

2.50

3.50

4.50

5.50

6.50

7.50

8.50

JAN

APR

JUL

OCT

$ Per Bu.

Avg.2005-09

2010

2011

G-P-02



U S ANNUAL CORN PRODUCTIONCrop Year

2

4

6

8

10

12

14

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Bil. Bushels

G-NP-07


Data Source: USDA-NASS, Compiled & Forecasts by LMIC

NATIONAL AVERAGE CORN YIELDCrop Year

60

80

100

120

140

160

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Bu. Per Acre

G-NP-04



12/13/2011

10

U S ANNUAL CORN ENDING STOCKSCrop Year

0

1

2

3

4

5

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Bil. Bushels

G-NP-09



U.S. CORN DISAPPEARANCE AND STOCKSCrop Year

0

2

4

6

8

10

12

14

16

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Bil. Bushels

Stocks

Exports

Food, Seed& Industrial

Feed &Residual

G-NP-12



NATIONAL AVERAGE CORN PRICECrop Year, Received by Farmers

1.00

2.00

3.00

4.00

5.00

6.00

7.00

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

$ Per Bushel

G-NP-03



Feedlot Cost of Gain Kansas, $/cwt.

40.00

50.00

60.00

70.00

80.00

90.00

100.00

110.00

Permanently Higher Grain Prices is a Game Changer for the Beef Industry

• More emphasis on forage to maintain competitiveness

– More value for stocker production

• Must return to our ruminant roots

KANSAS FEEDLOT CLOSEOUTSFeeding Costs per Cwt, Steers

65

70

75

80

85

90

95

100

105

110

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

$/cwt

Avg.

2005/

09

2010

2011

10/03/11Data Source: KSU Focus on Feedlots, Compiled by LMIC

12/13/2011

11

Price-Weight Relationship Medium/Large No. 1 Steers

100105110115120125130135140145150155160165

375 425 475 525 575 625 675 725 775 825 875 925

weight (pounds)

Pri

ce (

$/c

wt) 'APR 2005

Oct-11

Steer Price, Total Value and Value of Gain, Oct 2011, Oklahoma 7-Market Ave.

Weight (lbs)

Average Price ($/cwt.)

Total Value ($/head)

Value of Gain 425 lb. Beg. Weight ($/lb.)



425 160.31 681.32

475 151.80 721.05

525 148.23 778.21

575 143.42 824.67

625 140.42 877.63 0.98

675 143.86 970.85 1.16

725 143.50 1040.38 1.20 1.31

775 140.78 1091.05 1.17 1.25

825 138.13 1139.57 1.15 1.20 1.31

875 139.03 1216.51 1.36

925 134.65 1245.51 1.23

Cattle Markets are Providing Twin Signals to Producers

• Increase Calf Production

– Herd Expansion

• More Stocker Production

– Keep feeder cattle on forage longer

• Both Signals Imply Increased Demand for Forage

• Different From History When Cow-Calf and Stocker Production was a Tradeoff

ANNUAL AVERAGE CATTLE PRICESSouthern Plains

55

75

95

115

135

155

1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

$ Per Cwt

500-600lbSteerCalves

700-800lbFeederSteers

FedSteers

C-P-06



Implications for Cattle Producers

• Strategic Position for Several Years

• Risk Considerations – Cattle markets have little downside risk

– Input markets have considerable upside risk

– All markets subject to short run volatility

• Manage Production – Control costs

– Use forage efficiently

• Marketing is Relatively Easier

Final Thoughts

• Cattle Markets Have Much Opportunity

– Supply support

– Growing Domestic and International demand

• But There are Still Challenges

– Competition for Resources

– Increased forage focus changes values and ways of doing business

12/13/2011

12

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vs. BEEF COW INVENTORY Mil. Head BEEF PRODUCTION Mil. Head Bil… · 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Bil. Pounds Turkey Chicken Lamb & Veal Pork Beef