Range Beef Cow Symposium, Dec. 3-5, 2013

rangebeefcow.com 1

Current Economic Picture for the Cow-Calf Producer

Range Beef Cow Symposium XXXIII

December 3, 2013

James G. Robb Director

james.robb@lmic.info

USDA Members: ERS APHIS GIPSA NASS WAOB AMS

Associate Members: AFBF ASI NCBA NPB CME-Group Canadian Consortium Noble Foundation CoBank TCFA CWB TCU

28 land Grant Universities:

Topics: Economic Environment and …

•   Macro Economic Factors Shaping the Picture –   World Economic Growth –   U.S. Economy and Domestic Consumer Demand –   Interest Rates

•   Changed Grain Market •   Quick Review -- U.S. Cattle Inventory •   Producer Cost Structure and Return Prospects •   Market Environment & Issues Beyond the Ranch USDA Data Sources – NASS, AMS, FAS, and ERS All Forecasts – LMIC

WORLD ECONOMIC GROWTHPercent Change, Annual

-2.5

-1.5

-0.5

0.5

1.5

2.5

3.5

4.5

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Percent

India

China

Emergingeconomies

Advancedeconomies

Data Source: IMF

QTRLY GROSS DOMESTIC PRODUCT (GDP)Real Dollar (2009) Change from Previous Quarter

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

1998 2000 2002 2004 2006 2008 2010 2012

Percent Change

11/30/13Livestock Marketing Information Center Data Source: Bureau of Economic Analysis, Compiled & Analysis by LMIC

PER CAPITA DISPOSABLE PERSONAL INCOME

Quarterly

28000

30000

32000

34000

36000

38000

40000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Dollars

CurrentDollar

2005Dollar

Data Source: Department of Commerce-BEA

Range Beef Cow Symposium, Dec. 3-5, 2013

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RETAIL ALL FRESH BEEF DEMAND INDEXThird Quarter, Using CPI 1990=100

100 9991 89 86 84

75 73 75 7882 82 83 85

9287

83 8378

74 75 76 78 80

0

20

40

60

80

100

120

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

Index Value

Data Source: Bureau of Labor Statistics, USDA-ERS, and LMIC

U.S. UNEMPLOYMENT RATESeasonally Adjusted, Quarterly

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Percent

Data Source: Bureau of Labor Statistics

Grain Market OMAHA CORN PRICESWeekly

3.50

4.50

5.50

6.50

7.50

8.50

JAN

APRJU

LOCT

$ Per Bu.

Avg.2007-11

2012

2013

Data Source: USDA-AMS

U S TOTAL CORN SUPPLY AND PRICECrop Year

8

9

10

11

12

13

14

15

1989 1992 1995 1998 2001 2004 2007 2010 2013

Bil. Bushels

1.25

2.25

3.25

4.25

5.25

6.25

7.25$ Per Bushel

SupplyPrice

Data Source: USDA-NASS, Forecasts by LMIC

U.S. CORN DISAPPEARANCE AND STOCKSCrop Year

0

2

4

6

8

10

12

14

16

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

Bil. Bushels

Stocks

Exports

Food, Seed& Industrial

Feed &Residual

Data Source: USDA-NASS, Forecasts by LMIC

Range Beef Cow Symposium, Dec. 3-5, 2013

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Cattle

RI 2

NH 4

DE 4

5

CT 6

MA 7

NJ 9

11

VT 12

MD 41

70

90113

155

174175

191200

221

231

260

290315 360

364

375

390

454

486490

510

527

610

651

686

694

715

851

908

912

922

925

10281328

1506

1688

1754

1757

1805

4015

0 to 155155 to 390390 to 912912 to 4016

BEEF COWS THAT CALVED JANUARY 1, 2013

(1000 Head)

U.S. Total: 29295

Data Source: USDA-NASS

-550

-119 -100

-79

-58-45

-44

-38

-32

-24

-22

-20

-20

-15-10

-10

-10

-10

-8

-5

-5

-5

-5

-4

MD -2

-1

MA -1NH -1

0

RI 0

DE 1

1

1

NJ 1CT 2

2

VT 24

4

4

5

10

2229

30

33

41

50 60

78

-550 to -15-15 to -1-1 to 44 to 79

CHANGE IN BEEF COWS NUMBERS JANUARY 1, 2012 TO JANUARY 2013

(1000 Head)

U.S. Total: -862

Data Source: USDA-NASS

-1368

-328-222

-171-166

-131-126

-110

-100

-81

-76

-72

-65

-55

-49

-49

-44

-43

-42

-38

-36-36

-35

-23

-20-15

-14

-12

-12

-10

-9MD -1

NJ -1

-1 RI 0

0

CT 0

DE 0

0

NH 0MA 1

VT 38

14

152228

28

74

133

-1400 to -55-55 to -14-14 to 00 to 134

CHANGE IN BEEF COWS NUMBERS JANUARY 1, 2003 TO JANUARY 2013

(1000 Head)

U.S. Total: -3236

Data Source: USDA-NASS

TOTAL CATTLE INVENTORY BY CYCLEU.S., January 1

65

75

85

95

105

115

125

135

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14

Mil. Head

1938-491949-581958-671967-791979-901990-042004-13

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

BEEF PRODUCTION vs. CATTLE INVENTORY

Inventory on January 1, U.S.

85

90

95

100

105

110

115

1988 1991 1994 1997 2000 2003 2006 2009 2012

Mil. Head

22

23

24

25

26

27

28Bil. Pounds

Commercial Beef Production

Total Cattle Inventory

Data Source: USDA-NASS

Range Beef Cow Symposium, Dec. 3-5, 2013

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Data Source: USDA-NASS, Forecasts by LMIC

JANUARY 1 TOTAL COW INVENTORYU.S., Annual

36

38

40

42

44

46

48

50

1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016

Mil. Head

COMMERCIAL BEEF PRODUCTIONQuarterly

5.3

5.7

6.1

6.5

6.9

JAN-MAR APR-JUN JUL-SEP OCT-DEC

Bil. Pounds

Avg.2008/12

2013

2014

2015

Data Source: USDA-NASS, Forecasts LMIC

TOTAL RED MEAT & POULTRY PRODUCTIONQuarterly

22.0

22.5

23.0

23.5

24.0

24.5

25.0

JAN-MAR APR-JUN JUL-SEP OCT-DEC

Bil. Pounds

Avg.2008/12

2013

2014

2015

Data Source: USDA-NASS, Forecasts LMIC

COW-CALF RETURNS AND CATTLE INVENTORY

U.S., Annual

-100

-60

-20

20

60

100

140

180

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

$ Per Cow

85

90

95

100

105

110

115

120Mil. Head

Cow-CalfReturns

CattleInventoryJan 1

C-P-6710/29/13Livestock Marketing Information Center

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

ANNUAL AVERAGE CATTLE PRICESSouthern Plains

55

75

95

115

135

155

175

195

1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

$ Per Cwt

500-600lbSteerCalves

700-800lbFeederSteers

FedSteers

Data Source: USDA-AMS, Forecasts by LMIC

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

C-P-3511/30/13Livestock Marketing Information Center

Data Source: USDA-AMS

Range Beef Cow Symposium, Dec. 3-5, 2013

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ESTIMATED AVERAGE COW CALF COSTSIncludes Pasture Rent, Annual

0

100

200

300

400

500

600

700

800

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

$ Per Cow

Data Source: USDA-AMS, NASS, Analysis and Forecasts by LMIC

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

-100

-50

0

50

100

150

200

250

300

350

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

$ Per Cow

Data Source: USDA-AMS, NASS, Analysis and Forecasts by LMIC

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 2014

$ Per Cwt

SteerPrice

Breakeven

ProjectedBreakeven

Latest Data: October 2013

Data Source: USDA-AMS, NASS, Analysis and Forecasts by LMIC

Economic Environment….

•   Domestic Consumer Demand Ok •   Foreign Beef Demand Relatively Strong but May Struggle •   Price Volatility Will Continue (Globalization, Ethanol, etc.) •   Market Shocks Will Continue (For Cattle includes:

9-11-2001; BSE; 2008 Credit Crisis) •   Chicken and Pork Output Ramping-Up •   Controls Already Set to Dramatically Reduced Beef Output •   Mistakes Are Costly, Sound Business Practices Required •   Feedstuff Costs Down But Still High – Forage is Valuable •   Segmentation of Market Accelerating •   Cattle Feeding Changing

Just Beyond the Ranch: Some Market Issues and Considerations

•   Technology •   Objective Grading of Carcasses •   Beta-Agonists •   Individual Animal ID/Management

•   Custom Feeding Model •   Data Management (“X-ing out”, Feed

Efficiency) •   Where Are Feedlot Placement Weights

Headed? •   How Well Will the Feedlot Shock Absorber

Work? •   Market Price/Quality Relationship is Key

Thank You!

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