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