Glynn Tonsor Dept. of Agricultural Economics Kansas State University

Transcription

1 Beef & Cattle Market Outlook Glynn Tonsor Dept. of Agricultural Economics Kansas State University 98 th Annual Beef Cattle Research Roundup, KSU Agricultural Research Center, Hays, KS April 19,

2 Economic Outlook Overview: Cow-Calf Recent calf price pullback; BUT Continued beneficiary of tight supplies and expanded heifer retention Returns over cash costs may set historic records 2013 may prove to be peak return year

3 MED. & LRG. #1 STEER CALF PRICES Pounds, Southern Plains, Weekly $ Per Cwt Avg JAN APR JUL OCT Livestock Marketing Information Center Data Source: USDA-AMS, Compiled & Analysis by LMIC C-P-49A 04/09/12

4 SLAUGHTER COW PRICES Southern Plains, 85-90% Lean, Weekly $ Per Cwt JAN APR JUL OCT Avg Livestock Marketing Information Center Data Source: USDA-AMS C-P-35 04/09/12

5 As of: 4/18/12 12 Strong Basis = $5 to $10/cwt miss on current calves

6 $ Per Cow ESTIMATED AVERAGE COW CALF RETURNS Returns Over Cash Cost (Includes Pasture Rent), Annual Livestock Marketing Information Center Data Source: USDA-AMS & USDA-NASS, Compiled & Analysis by LMIC C-P-66 03/21/12

7 CALF CROP U.S., Annual Mil. Head Smallest Since = 35.3 Million Head -1 Percent Livestock Marketing Information Center Data Source: USDA-NASS C-N-18A 01/29/12

8 JANUARY 1 FEEDER CATTLE SUPPLIES Residual, Outside Feedlots, U.S. Mil. Head million (-3.9%) Livestock Marketing Information Center Data Source: USDA-NASS C-N-30 01/29/12

9 When will U.S. national herd expand? -- by 2014??? -- who & where will expansion occur??? Mil. Head 7.0 HEIFERS HELD AS BEEF COW REPLACEMENTS January 1, U.S. KS: +5,000 (+2.0%) % Largest 4.5 Decreases: TX: -60,000 (-9.8%) OK: -55, (-15.5%) MO:-30,000 (-10.0%) AR: -21,000 (-15.4%) NM: -20,000 (-21.1%) Largest Increases: NE: +55,000 (+18.3%) SD: +40,000 (+14.3%) CO:+35,000 (+29.2%) WY: +25,000 (+17.9%) IA: +20,000 (+16.7%) C-N-38 01/29/12 Livestock Marketing Information Center Data Source: USDA-NASS

10 CHANGE IN BEEF COWS NUMBERS JANUARY 1, 2011 TO JANUARY (1000 Head) OK + TX = 98.1% of National Decline to -9-9 to 0 0 to to 113 VT 0 NH 1 MA 2 RI 0 CT 1 NJ -1 DE 0 MD 1-1 U.S. Total: -967 Livestock Marketing Information Center Data Source: USDA-NASS 01/27/12

11 Status of beef cow inventory spatial distribution Other: 1% BEEF COWS THAT CALVED JANUARY 1, 2012 (1000 Head) % TX/OK: Smallest % Since % 19% 11% % U.S. Total: National Herd: - 3.1% (vs. 2011) Smallest since to to to to 4366 VT 10 NH 4 MA 7 RI 1 CT 5 NJ 8 DE 4 MD 43 Livestock Marketing Information Center Data Source: USDA-NASS 01/27/12

12 KSU Beef Replacement; Excel Spreadsheet Decision Tool ( 4/18/12 Dodge City, KS Auction: Young Bred Cows $1,100 to $1,500 Notable regional variation Scenario1: FARPI Adjusted $/cwt (550 lbs $158 in 2012 to $161 in 2021) 6.5% interest/discount rate; 3% calf death loss 14

13 Economic Outlook Overview : Stockers Continued sophistication of this segment cheap corn days are unlikely to return Expected margins squeezed this spring by run on calves Historically strong basis on calves Accounting and economic profit divergence Value of consumed forage continues to increase

14 MED. & LRG. #1 FEEDER STEER PRICES Pounds, Southern Plains, Weekly $ Per Cwt Avg JAN APR JUL OCT Livestock Marketing Information Center Data Source: USDA-AMS, Compiled & Analysis by LMIC C-P-49 04/09/12

15 Buy-Sell spreadsheet tool ( 4/18/12 Salina, KS Situation: BeefBasis.com forecasted price of 750 lb steer July 23, 2012 is $154.29/cwt Average What is break-even purchase price of a 550 lb steer purchased on April 23, 2012? forecasted price is $170.10/cwt

16 Buy-Sell spreadsheet tool ( Selling Price Purchase $ $ $ $ $ $ $ Weight 1 Breakeven Purchase Price N/A N/A N/A N/A N/A N/A N/A 1 Enter the minimum purchase weight you are willing to consider. 2 Based on a feeding cost of gain of $90/cwt. Expected Return: +$0.84/head [2.0 *($ $170.10)] Feeding COG $80 = +$7.50/head Expected Return Feeding COG $100 = - $5.82/head Expected Return But true expected purchase price may not be $170

17 Economic Outlook Overview : Feedlots Excess capacity and packer margin concerns will remain an issue Growing relevance of premiums, by-product values, and diversity across operations Great weather this winter = strong growth rates Probable losses for the year

18 Feedlot Capacity to - Calf Crop Ratio Assuming: 2011 Calf crop of 35.3 mil. hd Capacity (mil. Hd) DOF Assuming: 2021 Calf crop of 40.6 mil. hd Capacity (mil. Hd) DOF

19 Feedlot Operations and Marketings Feedlots: Less than 1,000 Head Capacity Operations Marketings (mil. hd) Annual Change in % of Total Marketings Marketings , % , % 14.14% , % 15.31% , % 15.27% , % 15.43% , % 12.31% Feedlots: Over 1,000 Head Capacity # Operations Marketings (mil. Hd) Annual Change in % of Total Marketings Marketings , % , % 85.86% , % 84.69% , % 84.73% , % 84.57% , % 87.69%

20 SLAUGHTER STEER PRICES 5 Market Weighted Average, Weekly $ Per Cwt JAN APR JUL OCT Avg Livestock Marketing Information Center Data Source: USDA-AMS

21 Stronger Basis Recently than Historic Patterns

22 NAIBER ( 4/18/12 Forecasts: 750 lb KS Steer placed on 4/23 & sold at 1,251 lbs on 9/16/12 = - $57/hd; $ Per Cwt CHOICE STEER PRICE vs BREAKEVEN Cattle Feeding, S. Plains, Monthly Latest Data: March 2012 Steer Price Breakeven Projected Breakeven Livestock Marketing Information Center C-P-21 04/13/12 Data Source: USDA-AMS & USDA-NASS, Compiled & Analysis by LMIC

23 Mil. Head CATTLE ON FEED US Total, Monthly 4/20/12 Pre-Report Estimates: On-Feed 4/1: 102% Placed in March: 92% Marketed in March: 95% Avg. 2006/ JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Livestock Marketing Information Center Data Source: USDA-NASS C-N-10 03/23/12

24 QUARTERLY FORECASTS (LMIC:4/18/12) % Chg. Average % Chg. Comm'l % Chg. Year Comm'l from Dressed from Beef from Quarter Slaughter Year Ago Weight Year Ago Production Year Ago 2011 I 8, , II 8, , III 8, , IV 8, , Year 34, , I 8, , II 8, , III 8, , IV 7, , Year 32, , I 7, , II 7, , III 8, , IV 7, , Year 31, ,

25 QUARTERLY FORECASTS (LMIC: 4/18/12) Live Sltr. % Chg. Feeder Steer Price Year Steer Price from Southern Plains Quarter 5-Mkt Avg Year Ago 7-800# 5-600# 2011 I II III IV Year I II III IV Year I II III IV Year

26 Economic Outlook Overview : Beef Demand Meat prices rising w/i basket of purchases Domestic demand has surprised analysts Export success tempered but prospects remain bullish Discussion on demand getting complicated Growing interest in how my food is produced Animal welfare, food safety, antibiotics, hormone use, local, organic, traceability LFTB (lean finely textured beef) discussion Customer vs. consumer distinction importance

27 Source: March 12, 2012 TIME magazine

28 Year-over-Year increases in last 7 quarters (since Q3 of 10); Q = +5.99% Actual Quantity & Price Changes: 1980: 76.6 lbs (per capita cons.);$2.83 (real choice price) 2011: 57.3 lbs (per capita cons.);$2.15 (real choice price) Q1.2012: Per Capita Consumption = -0.19% Real Choice Beef Prices = +6.24% 33

29 U S BEEF AND VEAL EXPORTS Carcass Weight, Annual Bil. Pounds Livestock Marketing Information Center Data Source: USDA-ERS & USDA-FAS, Compiled & Analysis by LMIC I-N-06 03/21/12

30 U S BEEF AND VEAL EXPORTS As a Percentage of Production, Carcass Weight, Annual Percent Livestock Marketing Information Center Data Source: USDA-ERS & USDA-FAS, Compiled & Analysis by LMIC I-N-07 03/21/12

31 U S BEEF EXPORTS TO MAJOR MARKETS Carcass Weight, Monthly Mil. Pounds Japan Canada Mexico South Korea Livestock Marketing Information Center Data Source: USDA-ERS & USDA-FAS I-N-35 04/13/12

32 Developing trade discussions are new normal Japan may start accepting older cattle FTA = reduction of South Korea tariffs USMEF ID/Traceability study == U.S. falling behind WTO MCOOL ruling U.S. response Will Mexico ultimately place tariffs on U.S. pork? 37

33 USDA s longer-term projections (as of Feb. 2012)

34 USDA s longer-term projections (as of Feb. 2012) Beef cow inventory: 29.8 million in million in 2021 (+/ levels) Domestic per capita red meat and poultry consumption: 221 lbs in (Beef=65.7 lbs; Pork=50.4 lbs; Poultry=103.8 lbs) 198 lbs in 2013 (Beef=51.3 lbs; Pork=46.3 lbs; Poultry=98.5 lbs) 213 lbs in 2021 (Beef=58.7 lbs; Pork=47.2 lbs; Poultry=105.8 lbs) Beef exports: 2.30 billion lbs in billion lbs in billion lbs in 2021

35 Is overall uncertainty holding back investment??? WTO MCOOL ruling, response, next steps Animal welfare GIPSA fair market proposed rules / anticompetition listening sessions Ultimately little action w/r/t beef cattle industry BUT lots of wasted time & energy Environmental regulation concerns persist Farm bill and tax code/policy uncertainties If cow-calf herd used to expand when Exp. Profit=$100/cow, what trigger is needed today??? 40

36 More information available at: AgManager ( Glynn T. Tonsor Assistant Professor Dept. of Agricultural Economics Kansas State University 41

37 Utilize a Wealth of Information Available at AgManager.info

38 Receive Weekly Updates for AgManager.Info

39 K-State Decision Aides: Cattle Price Oriented ( Expectations on Future Cash Prices Examine Feeder Cattle Risk Management Alternatives K-State Feeder Cattle Risk Management Tool Project Premium/Discount of Calf/Steer Attributes K-State Feeder Cattle Price Analyzer Stocker Breakeven Selling/Purchasing Prices Cattle Breakeven Selling and Purchase Prices 44

40 Other K-State Decision Aides ( NPV of Beef Replacements KSU-Beef Replacements Beef Cow Lease Agreements KSU-CowLease Determining Flint Hills Pasture Rents KSU-Graze.xls 45

41 Beef-Cattle Economics webinar series Series of quarterly webinars on beef-cattle markets and other industry-related issues schedule (all webinars begin at 1:30 CST) February 7 May 1 August 7 November 6 For details about specific topics and registering for webinars see additional information on AgManager.info