1 Cattle Outlook 2011 and Beyond Shane Ellis Extension Livestock Economist Iowa State University...

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%

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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


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


Data Source: USDA/NASS

-145 5

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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


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

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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

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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


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

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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


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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



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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

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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


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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


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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



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



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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

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U S BEEF AND VEAL EXPORTSCarcass Weight, Monthly

70

95

120

145

170

195

220

245

270


Mil. Pounds

Avg.2005-09

2010

2011


Data Source: USDA-ERS & USDA-FAS

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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

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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



27

U S BEEF EXPORTS TO JAPANCarcass Weight, Monthly

5

10

15

20

25

30

35

40

45

50


Mil. Pounds

Avg.2005-09

2010

2011



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Profitability

• Profitability in 2011, substantial but brief

• Feed and feeder cattle prices keep pressure on margins

• Profitability in cattle feeding = margin risk management

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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


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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

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Yearling Cattle Crush Margin ($/Head) by Sale Month

Cattle on Feed: Cash Feeder and Corn Price at Placement and

Wednesday Live Cattle Futures Prices

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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

[email protected]

www.econ.iastate.edu/ifo

www.econ.iastate.edu/margins

515-294-8030

1 Cattle Outlook 2011 and Beyond Shane Ellis Extension Livestock Economist Iowa State University...

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