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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
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
Beef Demand ShiftersBeef Demand ShiftersWhat’s been taking place recently?What’s been taking place recently?
• Low carb diet effect has worn offLow carb diet effect has worn off
• Consumer’s disposable income growth slowingConsumer’s disposable income growth slowing
• Expect more domestic demand weaknessExpect more domestic demand weakness
• How do we turn this around?How do we turn this around?
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. Was A Net Exporter From 1981-2003U.S. Was A Net Exporter From 1981-2003
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-July 2006 imports Jan-July 2006 imports 32% below 2002’s and 32% below 2002’s and 21% below 2001’s21% 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
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08
Year
Bil
lio
n L
bs.
Source: USDA & LMIC, 2006-2008 Forecasts
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
• Other countries may have comparative advantage Other countries may have comparative advantage in cow-calf productionin cow-calf production
• Exports to Pacific Rim increasing in ’07Exports to Pacific Rim increasing in ’07
• Regaining market share will take several yearsRegaining market share will take several years
– Market access is keyMarket access is key
• Consumer incomes in importing countries are key Consumer incomes in importing countries are key to long-run growth in exportsto long-run growth in exports
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 08
Year
Bil
lio
n L
bs.
Source: USDA & LMIC, 2006-2008 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.2000-04
2005
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 17% vs. 2005 U.S. Beef Cow Slaughter Up 17% 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
Slaughter Is Expected To Rise ModestlySlaughter Is Expected To Rise Modestly
Annual U.S. Commercial Cattle Slaughter
31323334353637383940414243
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08
Million
Head
Source: USDA & K-State Research & Extension 2006 partially estimated, LMIC Forecast for 2007-2008
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, 2007-2008 LMI C forecasts
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 08
Year
Bill
ion
Pou
nd
s
Source: USDA & K-State Research & Extension 2006 partially estimated & LMIC forecasts for 2007-2008
KSU Dept. of Ag Econwww.agmanager.info
K-State Research & ExtensionK-State Research & Extension
Sharp Price Recovery from Summer LowsSharp Price Recovery from Summer Lows
Kansas Direct Slaughter Steers Weekly Weighted Average Live Weight Prices
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 SpringFutures Are Pretty Optimistic For Spring
Mid-Month Futures Based Price Forecasts Kansas Slaughter Steers
80
82
84
86
88
90
92
94
96
98
Oct.'06
Nov.'06
Dec.'06
J an.'07
Feb.'07
Mar.'07
Apr.'07
May'07
J un.'07
J ul.'07
Aug.'07
Sep'07
Date
Pri
ce (
$/c
wt.
)
3 Yr. Avg. Basis Most Neg. Basis Most Pos. Basis
Source: CME & K-State Research & ExtensionForecasts =10/13/06 Futures Price + Basis Estimates
KSU Dept. of Ag Econwww.agmanager.info
K-State Research & ExtensionK-State Research & Extension
Prices Could Wind Up Record High Again in ‘06Prices Could Wind Up Record High Again in ‘06
Kansas Direct Slaughter Steer Prices .
60
65
70
75
80
85
90
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06
Year
Pri
ce
($
/cw
t.)
Source: AMS-USDA, Dodge City, KS, 2006 forecast
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
But Higher Corn Prices Lead To Lower Bids for FeedersBut Higher Corn Prices Lead To Lower Bids for Feeders
Kansas Combined Auction (Dodge City, Pratt, Salina) Weekly Weighted Average 700-800 Lb. Steer Prices
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 & K-State Research & Extension
KSU Dept. of Ag Econwww.agmanager.info
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
K-State Research & ExtensionK-State Research & Extension
Rising Corn Prices Pushing Prices LowerRising Corn Prices Pushing Prices Lower
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 (
$/c
wt.
)
2005 2006 5 Yr Avg
Source: AMS-USDA, Dodge City, KS &K-State Research & Extension
KSU Dept. of Ag Econwww.agmanager.info
K-State Research & ExtensionK-State Research & Extension
Near Record High Calf Prices Again In ‘06Near Record High Calf Prices Again In ‘06Cycle Peak in ’05 & ‘06Cycle Peak in ’05 & ‘06
Dodge City, KS 500-600 Lb. Steer Prices .
6065707580859095
100105110115120125130135
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06
Year
Pri
ce
($
/cw
t.)
Source: AMS-USDA, Dodge City, KS & KSU, 2006 Forecast .
K-State Research & ExtensionK-State Research & Extension
Ethanol, Corn Prices, & Cattle Ethanol, Corn Prices, & Cattle
K-State Research & ExtensionK-State Research & Extension
3 Largest Corn Crops On Record3 Largest Corn Crops On Record
Total U.S. Corn Production
3
4
5
6
7
8
9
10
11
12
13
73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05
Year
Pro
du
ctio
n (
Bill
ion
Bu
.)
.
Source: USDA WASDE Report: 10.12.06
KSU Dept. of Ag Econwww.agmanager.info
K-State Research & ExtensionK-State Research & Extension
But Corn Usage Has Been Growing RapidlyBut Corn Usage Has Been Growing Rapidly
U.S. Total Corn Usage
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
12.0
13.0
73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05Year
Billion
Bu
.
.
Domestic Corn Usage
Trendline
Source: USDAWASDE Report: 10.12.06
KSU Dept. of Ag Econwww.agmanager.info
K-State Research & ExtensionK-State Research & Extension
Ethanol Usage Growing RapidlyEthanol Usage Growing RapidlyFood, Alcohol, & Industrial Corn Usage
% of U.S. Production
0%
5%
10%
15%
20%
25%
30%
35%
73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05Year
Perc
en
t of
Pro
du
ctio
n
Source: USDA & KSUWASDE Report: 10.12.06
2006 Estimate
KSU Dept. of Ag Econwww.agmanager.info
K-State Research & ExtensionK-State Research & Extension
U.S. Will Need More Corn AcresU.S. Will Need More Corn AcresHow Do We Get Them?How Do We Get Them?
U.S. Corn Planted Acreage
60
65
70
75
80
85
90
72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06Year
Million
Acr
es
.
Source: USDAWASDE Report: 10.12.06
KSU Dept. of Ag Econwww.agmanager.info
K-State Research & ExtensionK-State Research & Extension
It Will Take Higher PricesIt Will Take Higher Prices To Push Acreage Higher To Push Acreage Higher
U.S. Average Corn Price .
$1.50
$1.70
$1.90
$2.10
$2.30
$2.50
$2.70
$2.90
$3.10
$3.30
$3.50
73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05Year
Avg
. Farm
Pri
ce (
$/B
U.)
.
Source: USDAWASDE Report: 10.12.06
KSU Dept. of Ag Econwww.agmanager.info
Average Prices Will Be Higher and Frequency of Price Spikes Could Increase
K-State Research & ExtensionK-State Research & Extension
Where Are Corn Prices Headed?Where Are Corn Prices Headed?Higher Corn Prices Spell Trouble for Livestock ProducersHigher Corn Prices Spell Trouble for Livestock Producers
Kansas Monthly Corn Prices
1.251.501.752.002.252.502.753.003.253.503.754.004.254.504.755.00
75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05
Year
Co
rn P
rice
($/
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
Hog Outlook Hog Outlook
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: Iowa State University
32 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
But Export Growth Has Been PhenomenalBut Export 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
Prices Headed Lower in 2007Prices Headed Lower in 2007
National Weighted Average Base Hog PricesQuarterly, 2001.3 - 2007.4 (Carcass Weight)
30
35
40
45
50
55
60
65
70
75
3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
01 02 03 04 05 06 07
Year & Quarter
Pri
ce
($
/cw
t.)
Source: USDA-AMS, 2006.4 & 2007 forecast
www.agmanager.info/livestock/marketingwww.agmanager.info/livestock/marketing