cattle and beef markets: short and long run challenges and

Cattle and Beef Markets: Short and Long Run Challenges and Opportunities

Derrell S. Peel Breedlove Professor of Agribusiness and Extension Livestock Marketing Specialist

Oklahoma State University

Major Beef Market Factors

• Cattle Inventory and Beef Production • Beef Demand • International Trade • Feed and Input Markets • Forage Conditions

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

140

150

160

170

180

190

200

210

JAN APR JUL OCT

$ Per Cwt.

Avg.2007-11

2012

2013

C-P-6204/29/13Livestock Marketing Information Center

Data Source: USDA-AMS

SLAUGHTER STEER PRICESSouthern Plains, Weekly

859095

100105110115120125130135

JAN APR JUL OCT

$ Per Cwt.

Avg.2007-11

2012

2013



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

95

105

115

125

135

145

155

165

JAN APR JUL OCT

$ Per Cwt.

Avg.2007-11

2012

2013


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

FEEDER STEER vs FED STEER PRICES700-800 Lbs. Minus Slaughter Steer, S. Plains, Weekly

5

10

15

20

25

30

35

40

JAN APR JUL OCT

$ Per Cwt.

Avg.2007-11

2012

2013



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

120130140150160170180190200210220

JAN APR JUL OCT

$ Per Cwt.

Avg.2007-11

2012

2013

C-P-49A04/29/13Livestock Marketing Information Center


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

45

55

65

75

85

95

JAN APR JUL OCT

$ Per Cwt.

Avg.2007-11

2012

2013



JANUARY 1 TOTAL CATTLE INVENTORYU.S., Annual

80

90

100

110

120

130

140

1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013

Mil. Head

C-N-0102/04/13

-1.6 Percent2013 = 89.3 Million Head

Livestock Marketing Information Center Data Source: USDA-NASS

JANUARY 1 BEEF COW INVENTORYU.S., Annual

28

30

32

34

36

38

40

1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012

Mil. Head

C-N-0201/29/12Livestock Marketing Information Center

Data Source: USDA-NASS

Cycl

ical

Ex

pans

ion

Cycl

ical

Li

quid

atio

n

Drou

ght

Liqu

idat

ion

Cycl

ical

Ex

pans

ion

Inpu

t Sho

ck-

Rece

ssio

n Li

quid

atio

n Dr

ough

t Li

quid

atio

n

-2.9 Percent2013 = 29.3 Million Head

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

20

25

30

35

40

1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013

Mil. Head



HEIFERS HELD AS BEEF COW REPLACEMENTS

January 1, U.S.

4.5

5.0

5.5

6.0

6.5

7.0

1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013

Mil. Head

C-N-3802/04/13

+1.9 %

Livestock Marketing Information Center Data Source: USDA-NASS

BEEF PRODUCTION vs. CATTLE INVENTORY

Inventory on January 1, U.S.

88

93

98

103

108

113

118

1987 1990 1993 1996 1999 2002 2005 2008 2011 2014

Mil. Head

22

23

24

25

26

27

28Bil. Pounds

Commercial Beef Production

Total Cattle Inventory

M-S-2308/10/12Livestock Marketing Information Center


Cattle Slaughter, Annual

28

2930

31

3233

34

3536

37

1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

Million Head

M-S-03A01/29/13Livestock Marketing Information Center

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

U S ALL HAY STOCKSDecember 1

70

80

90

100

110

120

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Mil. Tons

G-NP-2201/11/13Livestock Marketing Information Center

Data Source: USDA-NASS, Compiled & Forecasts by LMIC

Hay Price, $/ton

$50.00$70.00$90.00

$110.00$130.00$150.00$170.00$190.00$210.00

1982 1987 1992 1997 2002 2007 2012

All Hay Alfalfa Other Hay

US RANGE AND PASTURE CONDITIONPercent Poor and Very Poor, Weekly

10

20

30

40

50

60

70

May Jul Sep

Percent

Avg.2007-112012

2013

G-NP-3005/06/13

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

SOUTHEAST REGIONRANGE AND PASTURE CONDITION

Percent Poor and Very Poor, Weekly

0

5

10

15

20

25

30

35

40

45

May Jul Sep

Percent

Avg.2007-112012

2013

G-NP-3605/06/13


CORNBELT REGIONRANGE AND PASTURE CONDITION


0

10

20

30

40

50

60

70

80

May Jul Sep

Percent

Avg.2007-112012

2013

G-NP-3405/06/13


GREAT PLAINS REGIONRANGE AND PASTURE CONDITION


0

10

20

30

40

50

60

70

80

90

May Jul Sep

Percent

Avg.2007-112012

2013

G-NP-3205/06/13


SOUTHERN PLAINS REGIONRANGE AND PASTURE CONDITION


10

20

30

40

50

60

70

80

May Jul Sep

Percent

Avg.2007-112012

2013

G-NP-3305/06/13


WESTERN REGIONRANGE AND PASTURE CONDITION


15

25

35

45

55

65

75

May Jul Sep

Percent

Avg.2007-112012

2013

G-NP-3105/06/13


BEEF PRODUCTIONFederally Inspected, Weekly

375

400

425

450

475

500

525

550

JAN

APRJU

LOCT

Mil. Pounds

Avg.2007-11

2012

2013

M-S-1804/29/13Livestock Marketing Information Center

Data Source: USDA-AMS & USDA-NASS

CATTLE SLAUGHTERFederally Inspected, Weekly

470

520

570

620

670

720

JAN

APRJU

LOCT

Thou. Head

Avg.2007-11

2012

2013

C-S-0805/03/13Livestock Marketing Information Center


STEER DRESSED WEIGHTFederally Inspected, Weekly

800810

820830

840850

860870

880890

JAN

APRJU

LOCT

Pounds

Avg.2007-11

2012

2013



BEEF COW SLAUGHTERFederally Inspected, Weekly

45

50

55

60

65

70

75

80

85

JAN

APRJU

LOCT

Thou. Head

Avg.2007-11

2012

2013



TOTAL COW SLAUGHTERFederally Inspected, Weekly

85

95

105

115

125

135

145

155

JAN

APRJU

LOCT

Thou. Head

Avg.2007-11

2012

2013



U S BEEF AND VEAL EXPORTSCarcass Weight, Annual

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1989 1992 1995 1998 2001 2004 2007 2010 2013

Bil. Pounds

I-N-0604/28/13Livestock Marketing Information Center

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

MAJOR U S BEEF EXPORT MARKETSCarcass Weight, Annual

0

100

200

300

400

500

600

700

Japan Canada Mexico Korea

Mil. Pounds

Avg.2006/10

2011

2012



MAJOR U S BEEF IMPORT SOURCESCarcass Weight, Annual

0

100

200

300

400

500

600

700

800

900

Australia New Zealand Canada Mexico

Mil. Pounds

Avg.2006/10

2011

2012



U S BEEF AND VEAL IMPORTSCarcass Weight, Annual

1.5

2.0

2.5

3.0

3.5

4.0

1989 1992 1995 1998 2001 2004 2007 2010 2013

Bil. Pounds



United States: Beef Trade 2013-2014 Projected

0200400600800

10001200140016001800

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

1,00

0 M

ET

RIC

TO

NS

Exports Imports

CATTLE IMPORTS FROM MEXICOAnnual

400

600

800

1000

1200

1400

1600

1800

1987 1990 1993 1996 1999 2002 2005 2008 2011

Thou. Head



U S CATTLE IMPORTS FROM MEXICOMonthly

2545

6585

105

125145165

185205

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

Thou. Head

Avg.2007-11

2012

2013


Data Source: USDA-ERS & USDA-FAS

CORN ACREAGE

60

65

70

75

80

85

90

95

100

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

Acr

es P

lant

ed (m

illio

n)


NATIONAL AVERAGE CORN YIELDCrop Year

60

80

100

120

140

160

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

Bu. Per Acre



U S ANNUAL CORN PRODUCTIONCrop Year

2

4

6

8

10

12

14

16

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

Bil. Bushels



NATIONAL AVERAGE CORN PRICECrop Year, Received by Farmers

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

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

$ Per Bushel



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.2007/11

2012

2013



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

75

85

95

105

115

125

135

145

2005 2006 2007 2008 2009 2010 2011 2012 2013

$ Per Cwt

SteerPrice

Breakeven

ProjectedBreakeven

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

C-P-2105/06/13

Latest Data: April 2013

AVERAGE RETURNS TO CATTLE FEEDERSFeeding 725 Lb. Steers, S. Plains, Monthly

-325-275-225-175-125-75-252575

125175225275

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$ Per Head

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

C-P-2205/06/13

Latest Data: April 2013

2013 Cattle Market Expectations

• Cattle and beef prices pushed higher by limited supplies – Beef production down by 4.0-4.5%

• Beef demand will limit price increases • Question is “How much higher?” • Moderation in feed prices • Higher cow and heifer prices (if no drought)

– Breeding cow and heifer demand

2012, 2013 Projected

Corn PriceCrop year average, 1960-2013

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

“The Beef Industry Can Survive High Corn Prices Better Than the

Pork and Poultry Industries”

• True statement? • What are the implications for the beef industry?

It is often said:

Feedlot Cost of Gain Kansas, $/cwt.

40.0050.0060.0070.0080.0090.00

100.00110.00120.00130.00140.00

Cost per Pound of TDN, Cents/lb.

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

$18.00

1982 1987 1992 1997 2002 2007 2012

Corn Hay

Source: Nevil Speer. Based on corn at 88% and hay at 55% TDN

Permanently Higher Grain Prices is a Game Changer for the Beef Industry

• Change from grain intensive to forage intensive to maintain competitiveness – Must emphasize ruminant advantages – Enhanced role for stocker production

• Influence on production systems – Animal genetics (change animal size?) – Type and use of technology? – Better forage management – New forages? – New forage systems?

• Industry infrastructure (location and capacity) – Different feeding industry? – Regional shifts in cattle feeding, cow-calf and stocker production

ANNUAL AVERAGE CATTLE PRICESSouthern Plains

55

75

95

115

135

155

175

1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

$ Per Cwt

500-600lbSteerCalves

700-800lbFeederSteers

FedSteers



Cattle Sector Implications

• Cow-calf – Good profit potential; cost management key – Rebuilding strategy and costs – Producer transition

• Stocker – Good value of gain

• Feedlots and packers will continue to struggle – Loss of capacity likely

• Production challenges bigger than marketing challenges

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