r. curt lacy, ph.d. extension...

Beef Cattle Outlook R. Curt Lacy, Ph.D.

Extension Economist-Livestock

2012 University of Florida Beef Cattle Short Coourse

MED. & LRG. #1 & 2 STEER CALF PRICES400-500 Pounds, Georgia, Weekly

90

110

130

150

170

190

210

JAN

APRJU

LOCT

$ Per Cwt.

Avg.2006-010

2011

2012

Livestock Marketing Information Center Data Source: USDA-AMS, Compiled & Analysis by LMIC

SLAUGHTER STEER PRICES5 Market Weighted Average, Weekly

80859095

100105110115120125130135

JAN APR JUL OCT

$ Per Cwt.

Avg.2006-10

2011

2012

Livestock Marketing Information Center Data Source: USDA-AMS

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

135

145

155

165

175

185

195

205

JAN APR JUL OCT

$ Per Cwt.

Avg.2006-10

2011

2012

C-P-6204/30/12Livestock Marketing Information Center

Data Source: USDA-AMS

PRIMAL VALUEMonthly

100140180220260300340380420460500

Cutout Value Rib Loin Cutout Value Rib Loin

$/Cwt

Prime

Branded

Choice

Select

Ungraded

Mar-12Mar-11

Livestock Marketing Information Center Data Source: USDA-AMS, Compiled & Analysis by LMIC

What Determines Price?

What Determines Price?

Quantity

Pri

ce

Supply

Demand

Factors Affecting Supply & Demand

Supply

• Input prices

• Prices of alternative enterprises

• Technology

• Government

Demand

• Population

• Income

• Tastes and preferences

• Prices of complements and substitutes

SUPPLY

BEEF COWS THAT CALVED JANUARY 1, 2012

(1000 Head)

RI 1

DE 4

NH 4

CT 5

6

MA 7

NJ 8

10

VT 10

MD 43

78

100109

160

184185

195195

217

236

265

300330 331

360

365

435

452

469

486512

547

620

650

664

714

749

862

895

909

940

950

9951427

1456

1610

1728

1857

1884

43650 to 160160 to 435435 to 909909 to 4366

Livestock Marketing Information Center Data Source: USDA-NASS

U.S. Total: 29883 01/27/12

JANUARY 1 COW INVENTORYU.S., Annual

5

10

15

20

25

30

35

40

45

1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012

Mil. Head

Beef

Dairy

C-N-0201/29/12

-3.1 Percent2012 = 29.9 Million Head

+0.9 Percent2012 = 9.2 Million Head

Livestock Marketing Information Center Data Source: USDA-NASS

CHANGE IN BEEF COWS NUMBERS JANUARY 1, 2011 TO JANUARY 2012

(1000 Head)

-660

-288-53

-51

-40

-28

-21

-20

-19

-18

-18

-16

-11

-9

-9

-9

-8-5

-3

-3

-2

NJ -1-1

-1

RI 0

DE 0

0

0VT 0

0

0

CT 1

MD 1

NH 1MA 2

3

45

5

10

1010

10

14

20

20

22

23

55112

-660 to -9-9 to 00 to 1010 to 113

Livestock Marketing Information Center Data Source: USDA-NASS

U.S. Total: -967

01/27/12

4.0

4.5

5.0

5.5

6.0

6.5

7.0

1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012

Mil. Head

HEIFERS HELD AS BEEF COW REPLACEMENTS

January 1, U.S.

C-N-3801/29/12

+1.4 %

Livestock Marketing Information Center Data Source: USDA-NASS

C-N-0201/29/10

So when herd rebuilding begin?

25

30

35

40

45

50

1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010

Mil. Head

JANUARY 1 “BEEF COW FACTORY’ U.S., Annual

ReplacementHeifers

Beef Cows

Beef cows down 3.3 percent @ 29.90 million Beef replacement heifers up 1.4 percent @ 5.21 million Total beef cow factory down 3.1 percent

Meat production was slightly larger in 2011 but will be lower in 2012

Source: USDA-WASDE, April 2012 Report

2010

2011

Projected

2012

Forecast 11 vs 10 12 vs 11

Beef 26.41 26.19 25.04 -0.84% -4.59%

Pork 22.46 22.76 23.27 1.32% 2.17%

Total Red Meat* 49.18 49.24 48.58 0.12% -1.37%

Broilers 36.52 37.20 36.55 1.83% -1.78%

Total Poultry** 42.59 43.51 43.04 2.11% -1.09%

Total RedMeat & Poultry 91.77 92.75 91.62 1.06% -1.24%

BILLION POUNDS PERCENT CHANGECommodity

DEMAND

RETAIL ALL FRESH BEEF DEMAND INDEXAnnual, Using CPI 1990=100

10096

9186 86 82 79

75 75 77 80 81 85 8392 88 85 85

8077 75 77

0

20

40

60

80

100

120

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Index Value

Livestock Marketing Information Center Data Source: Bureau of Labor Statistics, USDA-ERS, Compiled & Analysis by LMIC

Restaurants are generally doing much better

Euro Crisis

• Why is the Euro problem a problem?

– Considerable amount of world’s capital in Europe.

– We are in a global economy.

– Psychology

2012 Corn Crop = So far so good

Source: Daily Livestock Report

Tight Stocks Since 1995 in Feed Crops Despite Large Crops

19.8% 17.5%

11.6% 12.8% 13.9% 13.1%

8.6% 6.3%

0%

10%

20%

30%

40%

50%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12

Ending Stocks Production Domestic Use and Exports Stocks:Use

US Corn Supply and Demand

More Corn Used for Ethanol as Energy Act Mandates

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

96

/97

97

/98

98

/99

99

/00

00

/01

01

/02

02

/03

03

/04

04

/05

05

/06

06

/07

07

/08

08

/09

09

/10

10

/11

11

/12

Feed and Residual Ethanol Exports Food Seed and Other Industrial

Source: USDA WASDE Report, 11/9/2011

Hit the 10% Blend Wall in the past year. Ethanol exports growing.

Demand Summary

• Beef – Slow but steady growth in the US economy – Situation in Europe remains a potential concern – US debt and deficit situation still has potential to create some

issues – Election year promises, promises

• Cattle – Corn market will continue to exert considerable influence over

the market. – 2012 is shaping up to be a good production year.

• Overall good but not great demand

IMPORTS AND EXPORTS

Factors Affecting Imports And Exports

• Exchange rates

• Demand for the product

• Trade barriers

EXCHANGE RATEUS Dollar base, Monthly

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Australia

800

900

1000

1100

1200

1300

1400

1500S. Korea

Australia

SouthKorea

04/02/12

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

U S BEEF AND VEAL EXPORTSCarcass Weight, Monthly

7095

120145

170195

220245

270295

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

Mil. Pounds

Avg.2006-010

2011

2012

I-N-1604/19/12

Livestock Marketing Information Center Data Source: USDA-ERS & USDA-FAS

Production, Imports, and Exports

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

23.0023.5024.0024.5025.0025.5026.0026.5027.0027.5028.00

Be

ef

Exp

ort

s &

Imp

ort

s (B

il. L

BS)

Be

ef

Pro

du

ctio

n (

Bil.

Lb

s.)

Production Beef and Veal Exports Beef and Veal Imports

What of world cattle and beef numbers?

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

Be

ef

Pro

du

ctio

n (

MM

T)

Cat

tle

(Th

ou

s. H

d.)

Cattle Beef Production

BEEF AND VEAL EXPORTSCarcass Weight, Annual

0.0

0.5

1.0

1.5

2.0

2.5

Brazil Argentina Uruguay US

Mill MT

20072008200920102011

04/18/12Livestock Marketing Information Center Data Source: USDA-FAS

PRICES, PROFITS AND RISK MANAGEMENT FOR 2012

Beef Supply and Utilization (millions of pounds)

2010 2011 2012Beginning Stocks 565 585 600

Production 26,414 26,309 25,150

Imports 2,297 2,056 2,455

Total Supply 29,276 28,950 28,205

Exports 2,299 2,788 2,725

Total Use 26,392 25,562 24,905

Ending Stocks 585 600 575 Data source: USDA WASDE

Table prepared by UGA

Projected Prices 2012 and Beyond

$40

$60

$80

$100

$120

$140

$160

$180

2010 2011 2012 2013

GA 500# steer GA 750# steer Choice fed steer GA Slaughter cow

Source: USDA, LMIC and UGA

90

95

100

105

110

115

-100

-50

0

50

100

150

1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Mil. Head $ Per Cow

COW-CALF RETURNS AND CATTLE INVENTORY

U.S., Annual

Cow-CalfReturns

CattleInventoryJan 1

C-P-6711/17/11

Livestock Marketing Information Center Data Source: USDA-AMS & USDA-NASS, Compiled & Analysis by LMIC

Cost of production will be higher but should be manageable for most

$75.00

$85.00

$95.00

$105.00

$115.00

$125.00

$135.00

$145.00

$155.00

$165.00

2012

Co

st o

f P

rod

uct

ion

($

/Cw

t.)

Expected Production Costs in 2012

Variable Costs Fixed Costs

Range of Expected Prices

There are opportunities to manage risk

$80.00

$90.00

$100.00

$110.00

$120.00

$130.00

$140.00

$150.00

$160.00

$170.00

$/C

wt.

CME Feeder Cattle Futures Month

CME Live and Feeder Cattle Futures Close for April 30, 2012

Feeder Cattle Futures

Live Cattle Futures

Beef Cattle Outlook Summary Tight Supplies +Good domestic demand +Good international demand = Favorable prices for the foreseeable future

Corn prices Weather Domestic demand International debt situation

Beef Cattle Outlook

R. Curt Lacy, Ph.D.

Extension Economist-Livestock

www.secattleadvisor.com

PRICES AND PROFITS

OTHER SLIDES

BEEF COW SLAUGHTERFederally Inspected, Weekly

4550556065707580859095

JAN

APRJU

LOCT

Thou. Head

Avg.2006-10

2011

2012

C-S-3404/27/12Livestock Marketing Information Center

Data Source: USDA-AMS & USDA-NASS

TOTAL COW SLAUGHTERFederally Inspected, Weekly

85

95

105

115

125

135

145

155

JAN

APRJU

LOCT

Thou. Head

Avg.2006-10

2011

2012

C-S-1404/27/12Livestock Marketing Information Center

Data Source: USDA-AMS & USDA-NASS

STEER DRESSED WEIGHTFederally Inspected, Weekly

800

810

820

830

840

850

860

870

JAN

APRJU

LOCT

Pounds

Avg.2006-10

2011

2012

C-S-1804/27/12Livestock Marketing Information Center

Data Source: USDA-AMS & USDA-NASS

WHOLESALE BONELESS BEEF PRICESFresh, 90% Lean, Weekly

120

140

160

180

200

220

240

JAN

APRJU

LOCT

$ Per Cwt.

Avg.2006-10

2011

2012

M-P-2404/30/12Livestock Marketing Information Center

Data Source: USDA-AMS

WHOLESALE BONELESS BEEF PRICESFresh, 50% Lean, Weekly

50

60

70

80

90

100

110

120

130

JAN

APRJU

LOCT

$ Per Cwt.

Avg.2006-10

2011

2012

M-P-2504/30/12Livestock Marketing Information Center

Data Source: USDA-AMS