Beef Cattle Outlook R. Curt Lacy, Ph.D. Extension Economist-Livestock University of Florida Beef Cattle Short Coourse

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 PRICES 400-500 Pounds, Georgia, Weekly $ Per Cwt. 210 190 170 150 Avg. 2006-010 2011 130 110 2012 90 JAN APR Livestock Marketing Information Center Data Source: USDA-AMS, Compiled & Analysis by LMIC JUL OCT

$ Per Cwt. 135 130 125 120 115 110 105 100 95 90 85 80 SLAUGHTER STEER PRICES 5 Market Weighted Average, Weekly JAN APR JUL OCT Avg. 2006-10 2011 2012 Livestock Marketing Information Center Data Source: USDA-AMS

BOXED BEEF CUTOUT VALUE Choice 600-900 Lbs. Carcass, Weekly $ Per Cwt. 205 195 185 175 165 Avg. 2006-10 2011 155 145 2012 135 JAN APR JUL OCT Livestock Marketing Information Center C-P-62 04/30/12 Data Source: USDA-AMS

$/Cwt 500 460 420 380 340 300 260 220 180 140 100 PRIMAL VALUE Monthly Cutout Value Rib Loin Cutout Value Rib Loin Mar-11 Mar-12 Prime Branded Choice Select Ungraded Livestock Marketing Information Center Data Source: USDA-AMS, Compiled & Analysis by LMIC

What Determines Price?

What Determines Price? Supply Price Demand Quantity

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) 217 547 236 620 6 1456 862 365 469 265 1610 714 1884 895 330 331 749 1427 1857 185 1728 435 909 486 4365 452 109 195 950 650 995 300 195 360 184 512 940 160 664 100 10 0 to 160 160 to 435 435 to 909 909 to 4366 VT 10 NH 4 MA 7 RI 1 CT 5 NJ 8 DE 4 MD 43 78 U.S. Total: 29883 Livestock Marketing Information Center Data Source: USDA-NASS 01/27/12

JANUARY 1 COW INVENTORY U.S., Annual Mil. Head 45 40 35 30 25 20 15 10 2012 = 29.9 Million Head -3.1 Percent 2012 = 9.2 Million Head +0.9 Percent Beef Dairy 5 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 Livestock Marketing Information Center Data Source: USDA-NASS C-N-02 01/29/12

CHANGE IN BEEF COWS NUMBERS JANUARY 1, 2011 TO JANUARY 2012 (1000 Head) -16 20-2 -1 0 23 5-3 -20 20 22-53 -18 0 112-51 -288-660 5 0 55-21 -8-19 -9-9 10 3 10-18 -5-11 -28-40 4 0 10-9 14 10-3 -660 to -9-9 to 0 0 to 10 10 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

Mil. Head HEIFERS HELD AS BEEF COW REPLACEMENTS January 1, U.S. 7.0 6.5 6.0 5.5 +1.4 % 5.0 4.5 4.0 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 Livestock Marketing Information Center Data Source: USDA-NASS C-N-38 01/29/12

So when herd rebuilding begin? Mil. Head 50 45 JANUARY 1 BEEF COW FACTORY U.S., Annual 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 40 Replacement Heifers Beef Cows 35 30 C-N-02 01/29/10 25 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010

Meat production was slightly larger in 2011 but will be lower in 2012 2010 2011 Projected 2012 Forecast 11 vs 10 12 vs 11 Commodity BILLION POUNDS PERCENT CHANGE 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% Source: USDA-WASDE, April 2012 Report

DEMAND

Index Value 120 RETAIL ALL FRESH BEEF DEMAND INDEX Annual, Using CPI 1990=100 100 100 96 91 92 88 85 85 80 80 86 86 82 79 75 75 77 80 81 85 83 77 75 77 60 40 20 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 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 14,000 12,000 10,000 8,000 US Corn Supply and Demand 50% 40% 30% 6,000 19.8% 17.5% 20% 4,000 2,000 11.6% 12.8% 13.9% 13.1% 8.6% 6.3% 10% 0 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 0% Ending Stocks Production Domestic Use and Exports Stocks:Use

More Corn Used for Ethanol as Energy Act Mandates Source: USDA WASDE Report, 11/9/2011 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 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

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 RATE US Dollar base, Monthly Australia 1.8 1.7 1.6 1.5 1.4 1.3 1.2 1.1 1.0 S. Korea 1500 1400 1300 1200 1100 1000 900 Australia South Korea 0.9 800 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Livestock Marketing Information Center Data Source: Pacific Exchange Rate Service, Univ. of B.C., Compiled & Analysis by LMIC 04/02/12

U S BEEF AND VEAL EXPORTS Carcass Weight, Monthly Mil. Pounds 295 270 245 220 195 170 145 120 95 70 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Avg. 2006-010 2011 2012 Livestock Marketing Information Center Data Source: USDA-ERS & USDA-FAS I-N-16 04/19/12

Production, Imports, and Exports Beef Production (Bil. Lbs.) 28.00 27.50 27.00 26.50 26.00 25.50 25.00 24.50 24.00 23.50 23.00 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 Beef Exports & Imports (Bil. LBS) Production Beef and Veal Exports Beef and Veal Imports

What of world cattle and beef numbers? Cattle (Thous. Hd.) 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Beef Production (MMT) Cattle Beef Production

Mill MT 2.5 BEEF AND VEAL EXPORTS Carcass Weight, Annual 2.0 1.5 1.0 2007 2008 2009 2010 2011 0.5 0.0 Brazil Argentina Uruguay US Livestock Marketing Information Center Data Source: USDA-FAS 04/18/12

PRICES, PROFITS AND RISK MANAGEMENT FOR 2012

Beef Supply and Utilization (millions of pounds) 2010 2011 2012 Beginning 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 $180 $160 $140 $120 $100 $80 $60 $40 2010 2011 2012 2013 Source: USDA, LMIC and UGA GA 500# steer GA 750# steer Choice fed steer GA Slaughter cow

$ Per Cow COW-CALF RETURNS AND CATTLE INVENTORY U.S., Annual Mil. Head 150 115 100 50 110 105 Cow-Calf Returns 0-50 100 95 Cattle Inventory Jan 1-100 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 90 C-P-67 11/17/11 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 Cost of Production ($/Cwt.) $165.00 $155.00 $145.00 $135.00 $125.00 $115.00 $105.00 $95.00 $85.00 $75.00 Range of Expected Prices 2012 Expected Production Costs in 2012 Variable Costs Fixed Costs

There are opportunities to manage risk $/Cwt. $170.00 $160.00 $150.00 $140.00 $130.00 $120.00 $110.00 $100.00 $90.00 $80.00 CME Live and Feeder Cattle Futures Close for April 30, 2012 Feeder Cattle Futures Live Cattle Futures CME Feeder Cattle Futures Month

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