beef & cattle market outlook - agmanager.info · beef & cattle market outlook ... 1984 1986...

Beef & Cattle Market Outlook

Glynn Tonsor

Dept. of Agricultural Economics Kansas State University

1

Economic Outlook Overview: Cow-Calf

• Continued beneficiary of tight supplies and expanded heifer retention…

• Returns over cash costs may set historic

records – 2013 may prove to be “peak return year” …

• Will this coincide with record attendance for 100th Annual KSU Cattlemen’s Day???

MED. & LRG. #1 STEER CALF PRICES400-500 Pounds, Southern Plains, Weekly

115

135

155

175

195

215

235

JAN APR JUL OCT

$ Per Cwt.

Avg.2006-10

2011

2012

C-P-49A02/27/12Livestock Marketing Information Center

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

SLAUGHTER COW PRICESSouthern Plains, 85-90% Lean, Weekly

4045505560657075808590

JAN APR JUL OCT

$ Per Cwt.

Avg.2006-10

2011

2012

C-P-3502/27/12Livestock Marketing Information Center

Data Source: USDA-AMS

As of: 3/2/12

12’ Strong Basis =

+/- $7/cwt miss on current

calves…

ESTIMATED AVERAGE COW CALF RETURNSReturns Over Cash Cost (Includes Pasture Rent), Annual

-100

-50

0

50

100

150

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

$ Per Cow


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


-100

-50

0

50

100

150

200

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

$ Per Cow

C-P-6612/28/11

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


-100

-50

0

50

100

150

200

250

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

$ Per Cow


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

CALF CROPU.S., Annual

30

35

40

45

50

55

1951 1956 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011

Mil. Head

C-N-18A01/29/12

-1 Percent2011 = 35.3 Million Head

Livestock Marketing Information Center Data Source: USDA-NASS

Smallest Since 1950

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

25

27

29

31

33

35

37

39

41

43

1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012

Mil. Head

C-N-3001/29/12Livestock Marketing Information Center

Data Source: USDA-NASS

25.85 million (-3.9%)

HEIFERS HELD AS BEEF COW REPLACEMENTS

January 1, U.S.

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

C-N-3801/29/12

+1.4 %


When will U.S. national herd expand? -- by 2014??? -- who & where will expansion occur???

Largest Increases: NE: +55,000 (+18.3%) SD: +40,000 (+14.3%) CO:+35,000 (+29.2%) WY: +25,000 (+17.9%) IA: +20,000 (+16.7%)

Largest Decreases: TX: -60,000 (-9.8%)

OK: -55,000 (-15.5%) MO:-30,000 (-10.0%) AR: -21,000 (-15.4%) NM: -20,000 (-21.1%)

KS: +5,000 (+2.0%)

-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

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

(1000 Head)


U.S. Total: -967

01/27/12

OK + TX = 98.1% of National Decline

BEEF COWS THAT CALVED JANUARY 1, 2012

(1000 Head)

Livestock Marketing Information Center Data Source: USDA-NASS U.S. Total: 29883

01/27/12

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

National Herd: - 3.1% (vs. 2011)

Smallest since 1962

20% Other: 1%

24%

19% 12%

11%

Status of beef cow inventory spatial distribution…

TX/OK: Smallest % Since 1972

17

KSU – Beef Replacement; Excel Spreadsheet Decision Tool (http://www.agmanager.info/livestock/budgets/production/default.asp)

Scenario1: FARPI Adjusted $/cwt (550 lbs calves @ $158 in 2012 to $161 in 2021) 6.5% interest/discount rate; 3% calf death loss

2/23/12’

Dodge City, KS Auction:

Bred Cows $1,100 to

$1,500

Notable regional

variation…

Economic Outlook Overview : Stockers

• Continued sophistication of this segment – “cheap corn days” are unlikely to return

• Expected margins squeezed by run on calves;

but have widened since Feb. 20 – Historically strong basis on calves…

• Accounting and economic profit divergence – Value of consumed forage continues to increase…

MED. & LRG. #1 FEEDER STEER PRICES700-800 Pounds, Southern Plains, Weekly

90

100

110

120

130

140

150

160

170

JAN APR JUL OCT

$ Per Cwt.

Avg.2006-10

2011

2012



1991-2010 Average

3/1/12’ Salina, KS Situation: • BeefBasis.com forecasted price of 750 lb

steer June 4, 2012 is $161.24/cwt

• What is break-even purchase price of a 550 lb steer purchased on March 5, 2012? • forecasted price is $175.39/cwt

“Buy-Sell” spreadsheet tool (http://www.agmanager.info/livestock/budgets/production/beef/cattlebuysell.swf)

“Buy-Sell” spreadsheet tool (http://www.agmanager.info/livestock/budgets/production/beef/cattlebuysell.swf)

Expected Return: +$8.48/head [2.0 *($179.63-$175.39)] Feeding COG $80 = +$15.14/head Expected Return Feeding COG $100 = + $1.82/head Expected Return

Purchase $155.24 $157.24 $159.24 $161.24 $163.24 $165.24 $167.24Weight1

450 188.07 191.25 194.42 197.60 200.78 203.95 207.13500 179.08 181.95 184.82 187.69 190.56 193.43 196.31550 171.76 174.39 177.01 179.63 182.25 184.88 187.50600 165.71 168.13 170.54 172.96 175.37 177.79 180.20650 160.63 162.87 165.11 167.35 169.59 171.83 174.07700 156.31 158.40 160.49 162.58 164.67 166.76 168.85750 N/A N/A N/A N/A N/A N/A N/A

1 Enter the minimum purchase weight you are willing to consider.2 Based on a feeding cost of gain of $90/cwt.

Selling Price

Breakeven Purchase Price2

But “true” expected purchase price may not

be $175…

Economic Outlook Overview : Feedlots

• Excess capacity and packer margin concerns will remain an issue

• Growing relevance of premiums, by-product

values, and diversity across operations… – Great weather this winter = strong growth rates

• Probable losses for the year, but markets suggest potential improvement over 2011

Feedlot Capacity – to - Calf Crop Ratio Assuming: 2011 Calf crop of 35.3 mil. hd

DOF 15.5 16 16.5 17 17.5138 1.16 1.20 1.24 1.27 1.31148 1.08 1.12 1.15 1.19 1.22158 1.01 1.05 1.08 1.11 1.15168 0.95 0.98 1.02 1.05 1.08

Capacity (mil. Hd)

Assuming: 2021 Calf crop of 40.6 mil. hd DOF 15.5 16 16.5 17 17.5138 1.01 1.04 1.08 1.11 1.14148 0.94 0.97 1.00 1.03 1.06158 0.88 0.91 0.94 0.97 1.00168 0.83 0.86 0.88 0.91 0.94

Capacity (mil. Hd)

Feedlot Operations and Marketings Feedlots: Less than 1,000 Head Capacity

Operations Marketings (mil. hd)Annual Change in

Marketings% of Total Marketings

2006 86,000 3.64 13.94%2007 85,000 3.70 1.6% 14.14%2008 80,000 4.05 9.5% 15.31%2009 80,000 3.91 -3.5% 15.27%2010 75,000 4.03 3.1% 15.43%2011 75,000 3.17 -21.3% 12.31%

Feedlots: Over 1,000 Head Capacity

# Operations Marketings (mil. Hd)Annual Change in

Marketings% of Total Marketings

2006 2,165 22.48 86.06%2007 2,160 22.46 -0.1% 85.86%2008 2,170 22.40 -0.3% 84.69%2009 2,170 21.69 -3.2% 84.73%2010 2,140 22.08 1.8% 84.57%2011 2,120 22.58 2.3% 87.69%

SLAUGHTER STEER PRICES5 Market Weighted Average, Weekly

80859095

100105110115120125130

JAN APR JUL OCT

$ Per Cwt.

Avg.2006-10

2011

2012

Livestock Marketing Information Center Data Source: USDA-AMS

Up +/- $1.50 this week thru Thursday …

CHOICE STEER PRICE vs BREAKEVENCattle Feeding, S. Plains, Monthly

65

75

85

95

105

115

125

135

2004 2005 2006 2007 2008 2009 2010 2011 2012

$ Per Cwt

SteerPrice

Breakeven

ProjectedBreakeven

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

C-P-2102/17/12

Latest Data: January 2012

NAIBER (http://www.naiber.org/) 3/1/12’ Forecasts:

750 lb KS Steer placed on 3/5 & sold at 1,262 lbs on 8/5/12’ =- $77/hd;

http://www.naiber.org/�

CATTLE ON FEEDUS Total, Monthly

9.5

10.0

10.5

11.0

11.5

12.0

12.5

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

Mil. Head

Avg.2006-2010

2011

2012

C-N-1002/24/12Livestock Marketing Information Center

Data Source: USDA-NASS

QUARTERLY FORECASTS (LMIC:2/20/12)

32

% Chg. Average % Chg. Comm'l % Chg.Year Comm'l from Dressed from Beef fromQuarter Slaughter Year Ago Weight Year Ago Production Year Ago

2011I 8,317 1.87% 771 0.72% 6411.2 2.61%II 8,639 -0.47% 759 0.66% 6559 0.19%III 8,739 -0.14% 771 -0.32% 6737.4 -0.46%IV 8,397 -2.97% 773 -0.76% 6491.8 -3.70%

Year 34,092 -0.46% 768 0.06% 26199.4 -0.40%2012

I 8,095 -2.67% 774 0.40% 6265 -2.28%II 8,237 -4.65% 766 0.93% 6312 -3.77%III 8,129 -6.98% 785 1.88% 6385 -5.23%IV 7,952 -5.30% 787 1.81% 6259 -3.59%

Year 32,413 -4.93% 778 1.25% 25221 -3.73%2013

I 7,596 -6.16% 784 1.31% 5956 -4.93%II 7,820 -5.06% 772 0.74% 6037 -4.36%III 8,043 -1.06% 794 1.12% 6388 0.05%IV 7,714 -2.99% 795 0.94% 6129 -2.08%

Year 31,173 -3.83% 786 1.05% 24510 -2.82%

QUARTERLY FORECASTS (LMIC: 2/20/12)

33

Live Sltr. % Chg. Feeder Steer PriceYear Steer Price from Southern PlainsQuarter 5-Mkt Avg Year Ago 7-800# 5-600#

2011I 110.12 23.11 129.06 150.07II 112.79 17.08 132.03 148.61III 114.05 19.47 135.93 141.69IV 121.99 21.66 143.15 153.11

Year 114.74 20.29 135.04 148.372012

I 124-125 13.06 151-153 174-177II 126-129 13.05 151-154 173-177III 123-128 10.04 153-159 171-178IV 126-131 5.33 152-158 162-170

Year 125-128 10.25 151-157 169-1772013

I 128-134 5.22 150-158 166-177II 131-137 5.10 154-163 171-182III 126-134 3.59 155-165 169-184IV 129-138 3.89 153-165 163-178

Year 130-134 4.35 154-162 169-179

Economic Outlook Overview : Demand

• Meat prices rising within household basket of purchases…

• Beef demand has surprised analysts… • Bullish aspects of export success and

prospects…

CONSUMER PRICE INDEX - ALL ITEMS1982-1984 Base, Monthly

200

205

210

215

220

225

230

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

Index

Avg.2006-10

2011

2012

02/17/12Livestock Marketing Information Center Data Source: Bureau of Labor Statistics

CPI - MEATS1982-1984 Base, Monthly

190

195

200

205

210

215

220

225

230

235

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

Index

Avg.2006-10

2011

2012

02/17/12Livestock Marketing Information Center Data Source: Bureau of Labor Statistics

37

Actual Quantity & Price Changes: 1980: 76.6 lbs (per capita cons.); $2.83 (real choice price) 2011: 57.3 lbs (per capita cons.); $2.15 (real choice price)

--- 2011 was first annual increase since 2004 ---Year-over-Year increases in last 6 quarters (since Q3 of ’10); Q4.2011 = +3.87%

U S BEEF AND VEAL EXPORTSAs a Percentage of Production, Carcass Weight, Annual

0

2

4

6

8

10

12

1988 1991 1994 1997 2000 2003 2006 2009 2012

Percent

I-N-0701/25/12Livestock Marketing Information Center

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

U S BEEF EXPORTS TO MAJOR MARKETSCarcass Weight, Monthly

0102030405060708090

100

2003 2004 2005 2006 2007 2008 2009 2010 2011

Mil. Pounds

Japan

Canada

Mexico

SouthKorea

I-N-3501/17/12Livestock Marketing Information Center

Data Source: USDA-ERS & USDA-FAS

• Japan may start accepting older cattle… • FTA = reduction of South Korea tariffs • USMEF – ID/Traceability study == U.S. falling

behind • WTO MCOOL ruling

– U.S. response (Mar. 23, 2012) unknown… • Will Mexico ultimately place tariffs on U.S. pork?

41

“Developing” trade discussions are new normal …

USDA’s longer-term projections (as of Feb. 2012) … http://www.ers.usda.gov/Publications/OCE121/

USDA’s longer-term projections (as of Feb. 2012) … http://www.ers.usda.gov/Publications/OCE121/

• Beef cow inventory:

• 29.8 million in 2012 • 34.5 million in 2021 (+/- 1997 levels)

• Domestic per capita red meat and poultry consumption: • 221 lbs in 2004-2007 (Beef=65.7 lbs; Pork=50.4 lbs; Poultry=103.8 lbs) • 198 lbs in 2013 (Beef=51.3 lbs; Pork=46.3 lbs; Poultry=98.5 lbs) • 213 lbs in 2021 (Beef=58.7 lbs; Pork=47.2 lbs; Poultry=105.8 lbs)

• Beef exports: • 2.30 billion lbs in 2010 • 2.77 billion lbs in 2011 • 3.16 billion lbs in 2021

Is overall uncertainty holding back investment??? • WTO MCOOL ruling • Animal welfare • GIPSA “fair market” proposed rules / “anti-

competition” listening sessions … – Ultimately little action w/r/t beef cattle industry – BUT lots of wasted time & energy…

• Environmental regulation concerns persist • Farm bill and tax code/policy uncertainties…

– If cow-calf herd used to expand when Exp. Profit=$100/cow, what trigger is needed today???

44

More information available at:

AgManager (http://www.agmanager.info/)

Glynn T. Tonsor Assistant Professor

Dept. of Agricultural Economics Kansas State University

[email protected]

45

www.agmanager.info

http://www.agmanager.info/�

mailto:[email protected]�

BEEF COW SLAUGHTERFederally Inspected, Weekly

4550556065707580859095

JAN

APRJU

LOCT

Thou. Head

Avg.2006-10

2011

2012

C-S-3402/10/12Livestock Marketing Information Center

Data Source: USDA-AMS & USDA-NASS

SLAUGHTER COW PRICESSouthern Plains, 85-90% Lean, Weekly

40

4550

5560

6570

7580

85

JAN APR JUL OCT

$ Per Cwt.

Avg.2006-10

2011

2012



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



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

02468

101214161820

JAN APR JUL OCT

$ Per Cwt.

Avg.2006-10

2011

2012



LIVE TO CUTOUT BEEF PRICE SPREADMonthly

70

90

110

130

150

170

190

JAN MAR MAY JUL SEP NOV

$ Per Head

Avg.2006-010

2011

2012

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

C-P-0202/17/12

CUTOUT TO RETAIL BEEF PRICE SPREADMonthly

775

825

875

925

975

1025

Jan Mar May Jul Sep Nov

$ Per Head

Avg.2006-010

2011

2012


C-P-0402/17/12

CHOICE STEER VALUE AS A PERCENT OF RETAIL BEEF VALUE

Monthly

41

43

45

47

49

51

53

55

57

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Percent


C-P-0502/17/12

LIVE TO RETAIL BEEF PRICE SPREADMonthly

900

950

1000

1050

1100

1150

Jan Mar May Jul Sep Nov

$ Per Head

Avg.2006-010

2011

2012


C-P-0702/17/12

57

9

10

MD 10

23

25

26

32

55

6070

7575

107

150

160180

235

240 240

279

310

320

380

510 1170

1300

2370

2650

2950 Unreported1 to 2626 to 240240 to 2951

CATTLE ON FEED JANUARY 1, 2012 (1000 Head)


01/27/12

Other States: 88.4 U.S. Total: 14121

80

83

88

88

90

93

94

96 96

97

99100

100

MD 100

100

100

100

100

100

104

104

104 106

106

107

108

109

109

110

114

115

Unreported1 to 9696 to 104104 to 116

CATTLE ON FEED JANUARY 1, 2012 AS A % OF 2011


01/27/12

Other States: 96 U.S. Total: 101

TOTAL CATTLE NUMBERS JANUARY 1, 2012 (1000 Head)


RI 5

13

DE 19NJ 31

NH 35MA 41

CT 49

86

140

MD 200

VT 260

370

390470

790

800

810

860

920

9501020

1070

1110

1110

1210

1280

1300

1360

1390

1410

1490

1610

1670

1690

1710

1970

2150

2220

23602500

2750

34003650

3900

3900

4500

53506100

6450

11900

0 to 470470 to 13001300 to 25002500 to 11901

01/27/12

U.S. Total: 90769

-1400

-600

-200

-150 -50

-50

-50

-50

-50

-40

-30

-30

-20

-20

-20

-15-10

-10

VT -10

-4

-1

NJ -1

-1

RI 0CT 0

0

0

0

0

0

0DE 1

MA 1NH 1

MD 5

10

10

10

1020

20

20

50

50

50

60

80

100150

250

-1400 to -20-20 to 00 to 2020 to 251

CHANGE IN TOTAL CATTLE NUMBERS 2011 - 2012 (1000 Head)


U.S. Total: -1914

01/27/12

beef & cattle market outlook - agmanager.info · beef & cattle market outlook ... 1984 1986...

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