http://amap.missouri.edu

Livestock and Dairy Market Outlook

August 9, 2018Missouri Farm Bureau Commodity Conference

Dr. Scott BrownAgricultural Markets and PolicyDivision of Applied Social Sciencesbrownsc@missouri.edu

Cattle Outlook: Can Demand Save the Day?

Since 2016: Supply pressure Economics and weather pointed to beef cow expansion Other meat supplies have followed suit

Prices resilient thus far 2017 a rare year with supplies and prices up High-quality beef is still a growth market in 2018

Changes coming? Cow herd expansion slowing or coming to an end? Domestic demand at a new level? Trade concerns?

Hog Outlook: Looks Like a Rough Ride Ahead

We know 2 major problems on supply/demand balance Production: faster growth than population 13 of 14 quarters Exports: have helped offset production growth… until now? Cold Storage: pork stocks have surpassed year ago lately

Domestic demand strength has performed well Good meat demand has moderated price pain Demand for pork products has been mixed

Feed prices may moderate cost increases

Meat Production

16

20

24

28

32

36

40

44

1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019(p)

Billio

n Po

unds

Beef Pork Chicken

More Meat for U.S. Consumers Still to Come

196

200

204

208

212

216

220

224

1996 1999 2002 2005 2008 2011 2014 2017

Poun

ds p

er P

erso

n

Domestic Meat Availability

Beef Availability per U.S. Resident

-5

-4

-3

-2

-1

0

1

2

3

4

5

1991 1995 1999 2003 2007 2011 2015 2019 (p)

Perc

ent C

hang

e vs

. Yea

r Ago

1991-2016 fed steer price change: AVG MAX MIN11 years with <-1% Q change 7.0% 24.7% -10.3%9 years with -1 to 1% Q change 1.4% 7.8% - 4.2%6 years with >1% Q change -5.7% 6.6% -18.4%

Pork Availability per U.S. Resident

45

46

47

48

49

50

51

52

53

54

1986 1990 1994 1998 2002 2006 2010 2014 2018(p)

Poun

ds (r

etai

l wei

ght)

1986-2016 hog prices: AVG MAX MIN8 years with <49 lbs. 60.96 76.03 54.3011 years with 49-51 lbs. 49.09 57.75 41.2412 years with >51 lbs. 42.73 52.50 34.00

Weather Had Cooperated in Growing the Beef Cow Herd

Weather Had Cooperated in Growing the Cow Herd, But Conditions Deteriorating

0

5

10

15

20

25

30

35

May Jul Sep

Percent

US RANGE AND PASTURE CONDITIONPercent Poor and Very Poor, Weekly

Avg. 2012-16 2017 2018

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

Livestock Marketing Information Center

G-NP-3008/06/18

G-NP-3308/06/18

05

1015202530354045

May Jul Sep

Percent

SOUTHERN PLAINS REGION RANGE AND PASTURE CONDITION

Percent Poor and Very Poor, Weekly

Avg. 2012-16 2017 2018

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

Livestock Marketing Information Center

G-NP-3408/06/18

0

5

10

15

20

25

30

35

May Jul Sep

Percent

CORNBELT REGION RANGE AND PASTURE CONDITION

Percent Poor and Very Poor, Weekly

Avg. 2012-16 2017 2018

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

Livestock Marketing Information Center

Cumulative Missouri Feeder Cattle Sales

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1 5 9 13 17 21 25 29 33 37 41 45 49

Milli

on H

ead

2018 2017 2016 2015

C-S-3408/06/18

35

40

45

50

55

60

65

JAN APR JUL OCT

Thou. Head

BEEF COW SLAUGHTERFederally Inspected, Weekly

Avg. 2012-16 2017 2018

Data Source: USDA-AMS & USDA-NASS

Livestock Marketing Information Center

Hay Prices

406080

100120140160180200220

2010 2011 2012 2013 2014 2015 2016 2017 2018

Dol

lars

per

Ton

U.S. Missouri

Beef Cow Growth Grinding to a Halt?

28

29

30

31

32

33

34

35

36

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019(p)

Milli

on H

ead

Cattle on Feed, 1000+ Capacity Lots

10.010.210.410.610.811.011.211.411.611.812.0

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

Milli

on H

ead

2017 2016 2011-15 avg. 2018

U.S. Hog Breeding Herd Inventory

5.6

5.7

5.8

5.9

6.0

6.1

6.2

6.3

6.4

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Milli

on H

ead

Breeding Herd Growth by State

-10 0 10 20 30 40 50 60 70 80 90

IllinoisMissouri

S. DakotaN. Carolina

TexasIowa

NebraskaOklahoma

OhioPennsylvania

Other states combined

Thousand Head, June 2018 vs. June 2014

H-S-1308/06/18

1700180019002000210022002300240025002600

JAN APR JUL OCT

Thou. Head

BARROW AND GILT SLAUGHTERFederally Inspected, Weekly

Avg. 2012-16 2017 2018

Data Source: USDA-AMS & USDA-NASS

Livestock Marketing Information Center

I-N-1608/06/18

150

170

190

210

230

250

270

290

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

Mil. Pounds

US BEEF AND VEAL EXPORTSCarcass Weight, Monthly

Avg. 2012-16 2017 2018

Data Source: USDA-ERS & USDA-FAS

Livestock Marketing Information Center

07/26/18

468

1012141618202224

1/10/15 7/11/15 1/9/16 7/9/16 1/7/17 7/8/17 1/6/18 7/7/18

1000 MT

TOTAL U.S. EXPORTS OF BEEF MUSCLE CUTSWeekly

Data Source: USDA-FAS

Livestock Marketing Information Center

I-N-3008/06/18

350375400425450475500525550575

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

Mil. Pounds

US PORK EXPORTSCarcass Weight, Monthly

Avg. 2012-16 2017 2018

Data Source: USDA-ERS & USDA-FAS

Livestock Marketing Information Center

07/26/18

5

10

15

20

25

30

35

40

45

Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Sep-17 Mar-18

1000 MT

TOTAL US EXPORTS OF PORK MUSCLE CUTSWeekly

Data Source: USDA-FAS

Livestock Marketing Information Center

Selected Retail Meat Prices

-20 0 20 40 60

Ground beefChuck roastRound roast

Beef for stewRound steakSirloin steak

Bacon, slicedPork chops

Ham, boneless

Chicken legs, bone-inChicken breast, boneless

Percent Change, 2017 vs. 2010

Jan-Jun 2018 vs. 2017:

-3.5%-4.1%

+4.7%-3.0%-1.7%

+4.5%-1.2%N/A

-0.6%-1.2%+2.8%

C-P-49A08/06/18

140150160170180190200210220230240

JAN APR JUL OCT

$ Per Cwt.

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

Avg. 2012-16 2017 2018

Data Source: USDA-AMS

Livestock Marketing Information Center

08/06/18

90

100

110

120

130

140

150

JAN APR JUL OCT

$ Per Cwt.

SLAUGHTER STEER PRICES5 Market Weighted Average, Weekly

Avg. 2012-16 2017 2018

Data Source: USDA-AMS

Livestock Marketing Information Center

Cattle Prices

6080

100120140160180200220240260

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018(p)

2020(p)

Dol

lars

per

Cw

t.

Fed Steer Feeder Steers (500-550 lb)

Hog Price (Quarterly)

30

40

50

60

70

80

90

2012 2013 2014 2015 2016 2017 2018 2019 (p)

Dol

lars

per

Cw

t

Quarterly U.S. All Milk Prices

101214161820222426

1997 2001 2005 2009 2013 2017

$ pe

r cw

t

USDA July Forecast

What’s Wrong With This Picture?

8.94

9.00

9.06

9.12

9.18

9.24

9.30

9.36

9.42

10

12

14

16

18

20

22

24

26

1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Dol

lars

per

Cw

t. / M

illion

Hea

d

All Milk Price Dairy Cows (right axis)

MPP Margin

0

2

4

6

8

10

12

14

16

18

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Dol

lars

per

hun

dred

wei

ght

Global Dairy Product Prices

0.0

0.5

1.0

1.5

2.0

2.5

3.0

7 Jan2014

1 Jul2014

6 Jan2015

1 Jul2015

Jan-16 Jul-16 Jan-17 Jul-17 Dec-17 Jun-18

Dol

lars

per

Pou

nd

Butter Cheese SMP

Know What to Look For Moving Forward

Average profitability will struggle through 2019 Heavy supplies weigh on prices and limit any rallies The market will struggle to assess tariff impacts Feed prices will move on weather and tariff news

Locking in positive profits will be difficult Domestic demand could offset a lot of other negatives

Economic projections still bright The majority of our meat and dairy is consumed in this country

Trade Assistance Package International market development Direct payments – hogs, dairy Domestic market purchases

Questions

Dr. Scott BrownUniversity of Missouri222 Mumford HallColumbia, MO 65211

(573) 882 – 3861

@MUScottBrown

Weekly Livestock Update, Brownfield Ag Newshttps:/brownfieldagnews.com/brownfield-livestock-market-updates/