Latest World Supply and Demand Estimates Report

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1 Louisiana Cattle Market Update Friday, June 10 th, 2011 Ross Pruitt, Department of Agricultural Economics and Agribusiness Louisiana State University AgCenter Latest World Supply and Demand Estimates Report The latest World Agricultural Supply and Demand Estimates report released June 9 th showed no change in total ending stocks for the current marketing year, but a ten cent increase on both ends of the price range. Decreases in the 2011/12 marketing year occurred for planted and harvested acreage leading to lowered expected production. Expected feed usage declined by a hundred million bushels with ethanol usage remaining unchanged. The most eye catching change was the reduction in expected ending stocks from 900 million bushels to 695 million bushels. If this comes to fruition, this will be 35 million less bushels than anticipated stocks level at the end of the current marketing year in August. Early projections for the average farm price are for $6 to $7 per bushel in the 2011/12 marketing year. Expectations were already building that acreage initially thought to be corn acreage was going to be lost and USDA s revisions of expected acreage confirmed that. A survey based estimate of acreage planted in corn will be released June 30 th by USDA NASS in addition to the quarterly Grain Stocks report. As a result of the lower production estimate on Thursday, the corn market surged higher and largely held those gains during trading on Friday for 2011/12 marketing year contract months. Despite the late start to corn planting in many areas that will impact yields, two thirds of the crop is rated good or excellent with roughly a quarter as fair as of Sunday, June 5 th. The margin for error with this year s crop is still slim given the expected tight ending stocks for the current marketing year, but good crop condition ratings provide some hope that the 2011/12 ending stocks may be raised once harvest begins. The total number of cattle on feed is still yet to drop below year ago levels, but this could occur by the end of the summer quarter. Beef production is even with last year s production levels, but will show a significant drop in Pork production is expected to stay fairly constant with year ago levels the remainder of 2011 and into Broiler production is starting to slow reflecting the financial difficulties that integrators are facing reflecting continued losses dating back to last fall according to some analysts. Broiler production is expected to increase 1 to 2% next year instead of the historical rate of 3% growth. Over the past few weeks, egg sets relative to last year have been 1% to 3% lower than the corresponding week a year ago. With feed costs at current levels, the advantages that broiler production typically has are very slim, if at all, and will continue to be so with historically tight grain supplies.

2 As the threat of flooding along the Mississippi River abates, there are USDA programs which may provide relief to affected producers. First, the Livestock Indemnity Program (LIP) is available should there be deaths as a result of the flooding. An additional program, Emergency Assistance for Livestock, Honeybees & Farm Raised Fish Program (ELAP) may provide additional benefits. In order to qualify for ELAP, individuals must have crop insurance on coverable commodities through the Risk Management Agency or Noninsured Crop Disaster Assistance Program (NAP) on all insurable commodities including hay. However, NAP coverage is not required for grazing. NAP coverage had to have been purchased by February 28, Any lost grazing days due to flooding are covered under ELAP. The cost of shipping feed to stranded livestock may be reimbursable if feed was purchased as a result of the flooding. Shipping costs for donated feeds may also be reimbursable. Producers must undertake due diligence to ensure safety of livestock to be eligible. Losses for both programs must occur prior to October 1, Notice of loss must be filed within 30 days to FSA with applications accepted until 30 calendar days after Both programs are national in nature and capped at $50 million. Due to availability of funds, payments may be scaled due to losses filed nationally. Payment amounts will not be calculated before January 31, 2012 due to possibility of having to scale payments made to producers nationally. Corn futures finished at least 25 cents higher than last week. The gains may have been higher following yesterday s WASDE report, but weaker crude, downward pressure from equity markets, and a stronger dollar on Friday slowed the bullish nature in the corn pit. Other factors that contributed to the gains during the week were continued concerns about lost acreage and production from delayed plantings. Live cattle futures were mostly lower on weaker outside markets and concerns about the strength of demand. Solid packer margins during the middle of the week were unable to prevent the decline as well as cash sales that were higher than last week. Feeder cattle were mostly lower on the higher cost of feeding and lower prices in the live cattle pit. Cash fed cattle sales on Tuesday were listed as moderate to good depending on the region. Sales were mostly a $1 higher over last week with Texas and Kansas sales at $105 and sales in Nebraska, Colorado, and Iowa at $107 to $108. Dressed sales ranged from $167 in Kansas to as much as $175 in Iowa.

3 Feeder Steer Prices* $/Cwt $148 $138 $128 $118 $108 $98 $ lbs lbs lbs OKC $ $ OKC $ $ $ $ $ $ *Prices are for Medium and Large 1 2 Steers **Mississippi prices are for midpoint of , , and steers Source: USDA AMS OKC $/Cwt $88 $78 $68 $58 $48 $38 Mississippi Cull Cow Prices Breaking Boning Lean This Week $75.00 $76.00 $68.50 Last Week $71.50 $77.50 $67.00 This Week Last Week Source: USDA AMS

4 Table 1. Futures Prices Live Feeder Month Cattle Change* Cattle Change* Corn Change* Jun $ Jul Aug $ $ Sep $ Oct $ $ Nov $ Dec $ /2 26 1/4 Jan $ Feb $ Mar $ /4 Apr $ $ May $ /4 25 Source: DTN * Change is from the previous Friday s close

5 Table 2. State and National Market Information Commodity This Week Last Week Last Year 5 Area Fed Steer Price Live $ $ $ Dressed $ $ $ Oklahoma City Feeder Cattle Prices cwt Med and Large #1 $ N/A $ cwt Med and Large #1 $ N/A $ Boxed Beef Cutout Values (weekly average) lb Choice cutout $ $ $ lb Select cutout $ $ $ U.S. Pork Cutout Value $ $ $ Georgia Dock Broilers $ $ $ Georgia B/S Breasts $ $ $ Georgia Leg Quarters $ $ $ Meat production (million lbs) Beef Pork Slaughter (1,000 head) Cattle Hogs 2,000 1,746 2,030 Broilers/Fryers 157, , ,161 Average Dressed Weight Cattle Hogs /4/2011 5/28/2011 6/5/2010 Poultry Placements (in thousands) 1 LA Broiler Egg Sets 3,258 3,273 3,500 US Broiler Egg Sets 206, , ,771 LA Broiler Chick Placements 2,986 3,515 3,059 US Broiler Chick Placements 171, , ,177 Source: USDA Agricultural Marketing Service, USDA National Agricultural Statistics Service and Livestock Marketing Information Center 1 Note the placements numbers are lagged by one week prior to publishing.