K-State Research & ExtensionK-State Research & Extension
Livestock OutlookLivestock Outlook
James Mintert, Ph.D.James Mintert, Ph.D.Professor & Extension State Leader Professor & Extension State Leader
Department of Agricultural EconomicsDepartment of Agricultural EconomicsKansas State UniversityKansas State University
www.agmanager.info/livestock/marketingwww.agmanager.info/livestock/marketing
[email protected]@ksu.edu
K-State Research & ExtensionK-State Research & Extension
U.S. Cattle InventoryJ anuary 1, 1975-2006
50
60
70
80
90
100
110
120
130
140
75 80 85 90 95 00 05Year
Million
Head
Source: USDA & K-State Research & ExtensionKSU Dept. of Ag Econwww.agmanager.info
A Shrinking IndustryA Shrinking IndustryResponding to a Lack of Profitability Responding to a Lack of Profitability
Current inventory is about 26% Current inventory is about 26% smaller than in 1975smaller than in 1975
K-State Research & ExtensionK-State Research & Extension
Rising Productivity Is Partially ResponsibleRising Productivity Is Partially Responsible
Dressed Beef Production . Per Cow Per Year .
200
250
300
350
400
450
500
550
600
650
700
50 55 60 65 70 75 80 85 90 95 00 05 10
Year
Po
un
ds
Beef Production Per Cow
30 Year Trend
Source: USDA & K-State Research & Extension .
K-State Research & ExtensionK-State Research & Extension
But Weaker Demand Was Key But Weaker Demand Was Key Beef Demand 1980-1998Beef Demand 1980-1998
Annual Retail Choice Beef Demand Index
88 86 8379 76
70 6966 65 62 59 58 56 55 53 51
94
50
0
10
20
30
40
50
60
70
80
90
100
81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98Year
Ind
ex V
alu
e
Source: USDA, Dept. of Commerce & K- State Research & Extension Price Deflated By CPI, 1980 =100 for Beef Demand Index
KSU Dept. of Ag. Econ. www.agmanager.info
K-State Research & ExtensionK-State Research & Extension
Annual Retail Choice Beef Demand Index
52 54 56 5559
63
50
0
10
20
30
40
50
60
70
80
90
100
98 99 00 01 02 03 04Year
Inde
x V
alue
Source: USDA, Dept. of Commerce & K- State Research & Extension Price Deflated By CPI, 1980 =100 for Beef Demand Index
KSU Dept. of Ag. Econ. www.agmanager.info
Measuring Changes In Beef DemandMeasuring Changes In Beef Demand1998-20041998-2004
Demand in ’04 Was Up About 25% from 1998 Level
K-State Research & ExtensionK-State Research & Extension
Measuring Changes In Beef DemandMeasuring Changes In Beef Demand1998-20051998-2005
Annual Retail Choice Beef Demand Index
52 54 56 5559
63 61
50
0
10
20
30
40
50
60
70
80
90
100
98 99 00 01 02 03 04 05Year
Ind
ex V
alu
e
Source: USDA, Dept. of Commerce & K- State Research & Extension Price Deflated By CPI, 1980 =100 for Beef Demand Index
KSU Dept. of Ag. Econ. www.agmanager.info
Beef Demand During All of ’05 Decreased About 4%But Demand in ’05 Was Still Up About 21% from 1998 Level
K-State Research & ExtensionK-State Research & Extension
11stst Quarter Demand Index Fell Quarter Demand Index Fell About 5% Below A Year AgoAbout 5% Below A Year Ago
Retail Choice Beef Demand Index J anuary - March Quarter
94
83 83 8276
7267 67
63 61 60 58 56 54 53 5348 48 48 50 52 52 53
59 58 56
0
10
20
30
40
50
60
70
80
90
100
81 83 85 87 89 91 93 95 97 99 01 03 05Year
Ind
ex
Val
ue
Source: USDA, Dept. of Commerce & K-State Research & Extension Price Deflated By CPI, 1980 =100 for Beef Demand Index
KSU Dept. of Ag. Econ.www.agmanager.info
K-State Research & ExtensionK-State Research & Extension
22ndnd Quarter Demand Index Fell Quarter Demand Index Fell About 10% Below A Year AgoAbout 10% Below A Year Ago
Retail Choice Beef Demand Index April-J une Quarter
93 90 9086 85
82
74 7470 70 68
64 61 59 58 57 54 53 55 5760 60 62
67 6760
0
10
20
30
40
50
60
70
80
90
100
81 83 85 87 89 91 93 95 97 99 01 03 05Year
Ind
ex V
alu
e
Source: USDA, Dept. of Commerce & K-State Research & Extension Price Deflated By CPI, 1980 =100 for Beef Demand Index
KSU Dept. of Ag. Econ.www.agmanager.info
K-State Research & ExtensionK-State Research & Extension
Where Are We Headed?Where Are We Headed?
Beef DemandBeef Demand
• Short run gains from low-carb diets behind usShort run gains from low-carb diets behind us
• Near term, look for weaker domestic demandNear term, look for weaker domestic demand
• To stop the decline industry needs to innovate To stop the decline industry needs to innovate
• Opportunities abound for innovatorsOpportunities abound for innovators
K-State Research & ExtensionK-State Research & Extension
International Trade Outlook International Trade Outlook
K-State Research & ExtensionK-State Research & Extension
Net Exports of U.S. Cattle, Beef, & By-Products1979-2005
-2.00
-1.50
-1.00
-0.50
0.00
0.50
1.00
1.50
2.00
2.50
3.00
79 81 83 85 87 89 91 93 95 97 99 01 03 05
Year
Bil
lio
n $
Source: U.S. Dept. of Commerce & LMIC Net Exports = Exports - Imports
U.S. Has Been A Net Exporter Since 1981U.S. Has Been A Net Exporter Since 1981
K-State Research & ExtensionK-State Research & Extension
Top 5 Importers Top 5 Importers Accounted for 91% of U.S. ExportsAccounted for 91% of U.S. Exports
Top 10 Importers of U.S. BeefRanked by Value of Imports in 2003
Other Category Consists of All Other Destinations
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
Japan Mexico S. Korea Canada HongKong
Taiwan Russia China Kuwait Egypt Other
Destination
Va
lue
(T
ho
us
an
d $
)
.
.
Source: USDA-FAS .
U.S. needs to U.S. needs to recapture these recapture these markets to regain markets to regain $’s and volume$’s and volume
K-State Research & ExtensionK-State Research & Extension
Annual Cattle Imports From Canada .
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06
Year
Millio
n H
ea
d .
Source: USDA & LMIC, 2006 Projected
Cattle Imports from Canada Are IncreasingCattle Imports from Canada Are Increasing But Remain Well Below 2002’s Record LevelBut Remain Well Below 2002’s Record Level
Jan-June 2006 imports Jan-June 2006 imports 28% below 2002’s and 28% below 2002’s and 15% below 2001’s15% below 2001’s
K-State Research & ExtensionK-State Research & Extension
Beef Imports From Canada DeclineBeef Imports From Canada Decline
Annual Beef Imports From Canada .
0.0
0.2
0.4
0.6
0.8
1.0
1.2
87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06
Year
Billio
n P
ou
nd
s .
Source: USDA & LMIC, 2006 Projected
K-State Research & ExtensionK-State Research & Extension
Result: U.S. Imports Falling Below 2005’sResult: U.S. Imports Falling Below 2005’s
Annual U.S. Beef Imports From All Sources .
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06
Year
Billio
n P
ou
nd
s .
Source: USDA & LMIC, 2006 Projected
K-State Research & ExtensionK-State Research & Extension
Where Are We Headed?Where Are We Headed?
TradeTrade
• U.S. strength is in high quality beef productsU.S. strength is in high quality beef products
• Regaining export markets could take yearsRegaining export markets could take years
• Consumer incomes in importing countries Consumer incomes in importing countries are key to long-run growth in exportsare key to long-run growth in exports
• Other countries may have comparative Other countries may have comparative advantage in cow-calf productionadvantage in cow-calf production
K-State Research & ExtensionK-State Research & Extension
Long, Slow Road to Export RecoveryLong, Slow Road to Export Recovery
Annual U.S. Beef Exports
0.0
0.5
1.0
1.5
2.0
2.5
3.0
80 82 84 86 88 90 92 94 96 98 00 02 04 06
Year
Bil
lio
n L
bs.
Source: USDA & LMIC, 2006-2007 Forecasts
K-State Research & ExtensionK-State Research & Extension
Export Recovery Means Net Beef Export Recovery Means Net Beef Imports in 2007 Could Be 1/2 2004’sImports in 2007 Could Be 1/2 2004’s
Annual U.S. Net Beef Imports
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
80 82 84 86 88 90 92 94 96 98 00 02 04 06
Year
Bil
lio
n L
bs.
Source: USDA & LMIC, 2006-2007 Forecasts
K-State Research & ExtensionK-State Research & Extension
Supply Side in the U.S. Supply Side in the U.S.
K-State Research & ExtensionK-State Research & Extension
Mid-Year Inventory Was Above 2005’s, And…Mid-Year Inventory Was Above 2005’s, And…
U.S. All Cattle & Calves Inventory J uly 1 Inventory
100
105
110
115
120
125
130
135
140
145
73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05Year
Mill
ion
Hea
d
Source: USDA & LMI C
J uly 1 Inventory = 105.7 Million Head 1.1% Above J uly 1, 2005 Inventory & 6.5% Below J uly 1, 1995 Inventory
K-State Research & ExtensionK-State Research & Extension
Strong Profitability Encouraging Expansion, But…Strong Profitability Encouraging Expansion, But…
Estimated Kansas Cow-Calf Returns .
-100
-50
0
50
100
150
200
250
300
75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05
Year
$'s
Per
Co
w
.
Source: KS State Farm Mgmt. Assoc. Returns Above Variable Costs
K-State Research & ExtensionK-State Research & Extension
US RANGE AND PASTURE CONDITIONPercent Poor and Very Poor, Weekly
0
10
20
30
40
50
60
May Jul Sep
Percent
Avg.2000-042005
2006
Livestock Marketing Information Center
Data Source: USDA/NASS
Poor Pasture Conditions Poor Pasture Conditions Could Be Holding Back ExpansionCould Be Holding Back Expansion
K-State Research & ExtensionK-State Research & Extension
U.S. Beef Cow Slaughter Up 13% vs. 2005 U.S. Beef Cow Slaughter Up 13% vs. 2005
Weekly F.I . Beef Cow Slaughter
30
35
40
45
50
55
60
65
70
75
01/07 02/25 04/15 06/03 07/22 09/09 10/28 12/16
Week Ending
Th
ou
san
d H
ead
2005 2006 5 Yr Avg
Source: USDA & K-State Research & Extension
KSU Dept. of Ag Econwww.agmanager.info
K-State Research & ExtensionK-State Research & Extension
But Female Slaughter Still LowBut Female Slaughter Still Low
Cow & Heifer Slaughter as a % of Steer Slaughter
70
80
90
100
110
120
130
50 55 60 65 70 75 80 85 90 95 00 05
Year .
Fe
ma
le S
ltr.
% o
f S
tee
rs
.
Female % of Steer Slaughter
Source: USDA & K-State Research & Extension
K-State Research & ExtensionK-State Research & Extension
Through July, Through July, Still Looks Like Modest Expansion UnderwayStill Looks Like Modest Expansion Underway
Cow & Heifer Slaughter vs. Cattle Herd Growth Rate .
70
80
90
100
110
120
130
50 55 60 65 70 75 80 85 90 95 00 05
Year .
Fe
ma
le S
ltr.
% o
f S
tee
rs
.
-6%
-4%
-2%
0%
2%
4%
6%
He
rd G
row
th R
ate
.
Female % of Steer SlaughterHerd Growth Rate
Source: USDA & K-State Research & Extension
K-State Research & ExtensionK-State Research & Extension
Slaughter Is Expected To RiseSlaughter Is Expected To Rise
Annual U.S. Commercial Cattle Slaughter
3132333435363738394041424344
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06
Million
Head
Source: USDA & K-State Research & Extension LMIC Forecasts for 2006 & 2007
Year
K-State Research & ExtensionK-State Research & Extension
Large On Feed InventoryLarge On Feed Inventory
U.S. Cattle On Feed Lots Over 1000 Head
9.50
9.75
10.00
10.25
10.50
10.75
11.00
11.25
11.50
11.75
12.00
12.25
J an Feb Mar Apr May J un J ul Aug Sep Oct Nov DecMonth
Million
Head
.
2006
2005
5 Yr. Avg.
Source: USDA & K-State Research & ExtensionKSU Dept. of Ag Econwww.agmanager.info
K-State Research & ExtensionK-State Research & Extension
Drought Pushing Light Weight Placements UpDrought Pushing Light Weight Placements Up
U.S. Net Placements Lots Over 1000 Head
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
3.00
J an Feb Mar Apr May J un J ul Aug Sep Oct Nov DecMonth
Million
Head
. 2006
2005
5 Yr. Avg.
Source: USDA & K-State Research & ExtensionKSU Dept. of Ag Econwww.agmanager.info
K-State Research & ExtensionK-State Research & Extension
Weights Will Remain HeavyWeights Will Remain Heavy
Commercial Cattle Carcass Weights .
550
575
600
625
650
675
700
725
750
775
800
70 75 80 85 90 95 00 05
Year
Dre
ssed
Wt.
/H
ead
(Lb
s.)
.
Trend
Source: USDA, LMI C, & KSU
K-State Research & ExtensionK-State Research & Extension
And Beef Production Will Rise CyclicallyAnd Beef Production Will Rise Cyclically
Commercial Beef Production
20
21
22
23
24
25
26
27
28
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06
Year
Bill
ion
Pou
nd
s
Source: USDA & K-State Research & Extension LMIC Forecasts for 2006 & 2007
K-State Research & ExtensionK-State Research & Extension
Summer Lows Are Behind UsSummer Lows Are Behind Us
Kansas Direct Slaughter Steers Weekly Weighted Average Live Weight Prices
65
70
75
80
85
90
95
100
01/06 02/17 03/31 05/12 06/23 08/04 09/15 10/27 12/08
Week Ending Date
Pri
ce (
$/c
wt.
)
200520065 Yr Avg
Source: AMS-USDA, Dodge City, KS &K-State Research & Extension
KSU Dept. of Ag Econwww.agmanager.info
K-State Research & ExtensionK-State Research & Extension
Futures Are Pretty Optimistic For FallFutures Are Pretty Optimistic For Fall
Mid-Month Futures Based Price Forecasts Kansas Slaughter Steers
80
82
84
86
88
90
92
94
96
98
Sep '06 Oct.'06
Nov.'06
Dec.'06
J an.'07
Feb.'07
Mar.'07
Apr.'07
May'07
J un.'07
Date
Pri
ce (
$/c
wt.
)
3 Yr. Avg. Basis Most Neg. Basis Most Pos. Basis
Source: CME & K-State Research & ExtensionForecasts =8/11/06 Futures Price + Basis Estimates
KSU Dept. of Ag Econwww.agmanager.info
K-State Research & ExtensionK-State Research & Extension
Prices Could Wind Up Record High Again in ‘06Prices Could Wind Up Record High Again in ‘06
Kansas Direct Slaughter Steer Prices .
60
65
70
75
80
85
90
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06
Year
Pri
ce
($
/cw
t.)
Source: AMS-USDA, Dodge City, KS, 2006 projected based upon CME Futures, 8.11.06
K-State Research & ExtensionK-State Research & Extension
Despite Feedlot Losses, Feeders Remain OptimisticDespite Feedlot Losses, Feeders Remain Optimistic
Monthly Iowa Yearling Finishing Steer Returns $'s Per Head
-200
-100
0
100
200
300
400
500
1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005Date
$'s
/Head
Source: Iowa State University KSU Dept. of Ag Econwww.agmanager.info
K-State Research & ExtensionK-State Research & Extension
Where Are Corn Prices Headed?Where Are Corn Prices Headed?Higher Corn Prices Spell Trouble for Livestock ProducersHigher Corn Prices Spell Trouble for Livestock Producers
Kansas Monthly Corn Prices
1.251.501.752.002.252.502.753.003.253.503.754.004.254.504.755.00
75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05
Year
Co
rn P
rice
($/
bu
.)
Source: USDA-Kansas Agricultural Statistics & K-State Research & Extension
1985-1989 Average = $2.23/bu.1990-1994 Average = $2.40/bu. 1995-1999 Average = $2.65/bu.2000-2004 Average = $2.23/bu.2004 Average=$2.59/bu.2005 Average=$2.02/bu.
Ethanol?Ethanol?
K-State Research & ExtensionK-State Research & Extension
Cattle Feeders Have Pushed Prices Back UpCattle Feeders Have Pushed Prices Back Up
Kansas Combined Auction (Dodge City, Pratt, Salina) Weekly Weighted Average 700-800 Lb. Steer Prices
80
85
90
95
100
105
110
115
120
125
01/06 02/17 03/31 05/12 06/23 08/04 09/15 10/27 12/08Week Ending Date
Pri
ce (
$/c
wt.
)
2005
2006
5 Yr Avg
Source: AMS-USDA, Dodge City, KS &
KSU Dept. of Ag Econ
K-State Research & ExtensionK-State Research & Extension
Feeders In ‘05 Averaged A Record High of $112/cwt.Feeders In ‘05 Averaged A Record High of $112/cwt.Prices in ’06 Could Wind Up Near ’05’s AveragePrices in ’06 Could Wind Up Near ’05’s Average
Dodge City, KS 700-800 Lb. Steer Prices .
60
65
70
75
80
85
90
95
100
105
110
115
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06
Year
Pri
ce (
$/c
wt.
)
Source: AMS-USDA, Dodge City, KS & KSU, 2006 forecast based upon CME futures 8.11.06
K-State Research & ExtensionK-State Research & Extension
Counter-Seasonal Price Path in Spring ‘06Counter-Seasonal Price Path in Spring ‘06
Kansas Combined Auction (Dodge City, Pratt, & Salina) Weekly Weighted Average 500-600 Lb. Steer Prices
95
100
105
110
115
120
125
130
135
140
145
01/06 02/17 03/31 05/12 06/23 08/04 09/15 10/27 12/08
Week Ending Date
Pri
ce (
$/c
wt.
)
2005 2006 5 Yr Avg
Source: AMS-USDA, Dodge City, KS &K-State Research & Extension
KSU Dept. of Ag Econwww.agmanager.info
K-State Research & ExtensionK-State Research & Extension
Record High Calf Prices Again In ‘05Record High Calf Prices Again In ‘05Cycle Peak in ’05 & ‘06Cycle Peak in ’05 & ‘06
Dodge City, KS 500-600 Lb. Steer Prices .
6065707580859095
100105110115120125130135
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06
Year
Pri
ce
($
/cw
t.)
Source: AMS-USDA, Dodge City, KS & KSU, 2006 Forecast .
K-State Research & ExtensionK-State Research & Extension
What About 2007?What About 2007?
Slaughter cattle prices in high $80’s during Q1 & Q2 ‘07Slaughter cattle prices in high $80’s during Q1 & Q2 ‘07
Feeder prices averaging about $110 - $112/cwtFeeder prices averaging about $110 - $112/cwt
K-State Research & ExtensionK-State Research & Extension
Iowa Farrow to Finish Profits,Iowa Farrow to Finish Profits,1965-20051965-2005
-30
-20
-10
0
10
20
30
40
65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05
$ Per Head
Source: John Lawrence, Iowa State University
1965-74: $10.04/head profit 1975-84: $14.22/head profit 1985-94: $10.51/head profit 1995-04: $ 0.52/head loss
K-State Research & ExtensionK-State Research & Extension
Iowa Farrow to Finish Profits, 1994-2006Iowa Farrow to Finish Profits, 1994-2006Iowa State University Calculations
-70
-50
-30
-10
10
30
50
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
$ Per Head
Source: John Lawrence, Iowa State University
29 consecutive months of profit, longest since 33 months in 1976-79
K-State Research & ExtensionK-State Research & Extension
Surprisingly Slow Growth in SlaughterSurprisingly Slow Growth in Slaughter
Commercial Hog Slaughter
65
70
75
80
85
90
95
100
105
110
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06
Year
Mill
ion H
ead
.
Source: USDA, 2006 & 2007 LMIC Forecasts
K-State Research & ExtensionK-State Research & Extension
Pork Production Expected To Rise Next Several YearsPork Production Expected To Rise Next Several Years
Annual U.S. Commercial Pork Production .
11
13
15
17
19
21
23
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06
Year
Billio
n P
ou
nd
s
Source: USDA, 1999 KSU Forecast
Source: USDA, 2006 & 2007 LMIC Forecasts
K-State Research & ExtensionK-State Research & Extension
Export Growth Has Been PhenomenalExport Growth Has Been Phenomenal
Annual U.S. Pork Carcass Imports & Exports .
0.0
0.5
1.0
1.5
2.0
2.5
3.0
87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
Year
Exports
Imports
Source: USDA
K-State Research & ExtensionK-State Research & Extension
National Weighted Avg. Hog PricesNational Weighted Avg. Hog PricesNegotiated Base Price Per Negotiated Base Price Per CarcassCarcass Hundredweight Hundredweight
2005*2005* 20062006 20072007
Qtr 1Qtr 1 $67.15$67.15 $56.39$56.39 $57-61$57-61
Qtr 2Qtr 2 $68.18$68.18 $63.47$63.47 $60-64$60-64
Qtr 3Qtr 3 $66.20$66.20 $62-64$62-64
Qtr 4Qtr 4 $59.83$59.83 $57-60$57-60
YearYear $66.96$66.96 $58-61$58-61 $54-58$54-58
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