University of Nebraska - incoln igitalcommons@university of Nebraska - incoln Range eef Cow ymposium nimal cience epartment ecember 25 tate of the eef ndustry and Cattle Market ituation and Outlook Follow this and additional works at: http://digitalcommons.unl.edu/rangebeefcowsymp Part of the nimal ciences Commons "tate of the eef ndustry and Cattle Market ituation and Outlook" (25). Range eef Cow ymposium. 51. http://digitalcommons.unl.edu/rangebeefcowsymp/51 This rticle is brought to you for free and open access by the nimal cience epartment at igitalcommons@university of Nebraska - incoln. t has been accepted for inclusion in Range eef Cow ymposium by an authorized administrator of igitalcommons@university of Nebraska - incoln.
tate of the eef ndustry nd Cattle Market ituation nd Outlook Prepared for: The Range eef Cow ymposium XX ecember, 25 Presented by: Randy lach 911. Nichols ve. Centennial, CO 8112 1-8-825-7525 website www.cattle-fax.com
M 14 12 1 8 Total Cattle nventory Total cattle numbers recorded their cycle lows in 24 at 94.88 million head and were 8.4 percent smaller than at the cycle peak that occurred in 1996. Total cattle numbers are expected to increase by more than 5 million head by 29 as herd expansion unfolds. U.. cattle numbers are expected to total 97.3 million head on January 1, 26 up more than 1.5% compared to a year earlier. 6 3 4 5 6 7 8 9 ource: U 26-29 Projected M 9. 8.5 8. 7.5 7. 6.5 6. 5.5 Cow laughter uring 25, cow slaughter was down about 5% or 2, head and totaled 4.95 million. The decline in cow slaughter was nearly equally split between beef cows and dairy cows. igher calf prices and higher milk prices have been major factors for the change in the slaughter totals for the two classes of cows. 5. 4.5 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 ource: U & Cattle-Fax 25-21 Projected 15 14 13 5-Yr vg. 12 Weekly Total Cow laughter 11 1 9 24 8 25 7 J F M M J J O N ource: U WK Year-to-date, weekly average cow slaughter has been about 6, head per week smaller than a year ago. Cow slaughter totals have increased seasonally from eptember into November. Cow slaughter is expected to run near year earlier levels during the first half of 26 and then increase during the second half of the year. Page 2 Cattle Market ituation
M 13 12 11 eifer laughter uring 25, heifer slaughter will be down about 55, head at 9.8 million head and be 2 million head smaller than during the cycle peak in 2. eifer slaughter totals are expected to grow during the next several years. 1 9 8 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 ource: U, Commercial 25-21 Projected P R C N T 39 36 33 3 eifers s % Of Total Feedlot Placements Through October, heifers as a percentage of feedlot placements have increased just slightly compared to a year ago and have averaged 32.1% for the year. s herd expansion continues during the next several years heifers are expected to be 3% to 32% of total feedlot placements. 27 24 8 81 82 83 84 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 ource: Cattle-Fax 25 year-to-date P R C N T 38 36 34 32 3 Monthly Percent eifers Placed 5-Yr vg. 24 25 eifers as a percentage of feedlot placements have fallen well below year ago levels during the fall of 25. The average during ugust, eptember and October was the smallest average since 1994 and was more than 2 percent smaller than the 3-year average. The breeding herd is expanding. 28 26 J F M M J J O N ource: Cattle-Fax MONT Cattle Market ituation -- Page 3
M 7. 6.5 6. 5.5 eef Replacement eifers igher calf prices, better profitability for cow-calf producers and improved forage and water conditions through many areas have stimulated increased interest in beef replacement heifer retention. eef replacement heifer numbers are expected to be 5, head larger by 29 than current levels. 5. 8 82 84 86 88 9 92 94 96 98 2 4 6 8 ource: U 26-9 Projected M 4 39 38 37 36 35 34 33 eef Cow nventory eef cow numbers will have increased about 8, head during 25 and on Jan. 1, 26 are expected to total 33.8 million head the largest beef cow herd since 1999. eef cow numbers were 1.5 million head larger than current levels at the cycle peak in 1996. U.. beef cow numbers are expected to increase an additional 1.5 to 1.8 million head by 29. 32 31 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 ource: U 26-21 Projected M 41. 4. 39. 38. 37. 36. Combined U.. and Canadian eef Cowherd Combined U.. and Canadian beef cow numbers are expected to total 39.2 million head on Jan. 1, 26 and will be nearly 2% larger than a year earlier. The increases in combined beef cow numbers since the discovery of in Canada have resulted in the largest combined beef cow herd since 1997, and have replaced all the cows removed from the herd during six years of U.. beef cow liquidation. 35. 34. 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 ource: U, tats Canada January 1 26 projected Page 4 Cattle Market ituation
M 42 4 38 36 34 32 3 28 26 U.. Feeder Cattle and Calf upply - Jan 1st U.. feeder cattle and calf supplies outside of feedlots are expected to total 28.4 million head on Jan. 1, 26 up about 2% (5, head) from a year earlier. Feeder cattle and calf supplies outside of feedlots in the U.. declined 17% (5.7 million head) from 1996 to Jan. 1, 24. 24 22 8 82 84 86 88 9 92 94 96 98 2 4 6 ource: U & Cattle-Fax Outside of Feedyards, 26 Projected M 7. 6.5 6. Canadian Feeder Cattle & Calf upply Outside Feedlots-Jan 1st Canadian feeder cattle and calf supplies have grown substantially since Jan. 1, 23. On Jan. 1, 26, feeder cattle and calf supplies in Canada are expected to total between 6.1 and 6.2 million head. 5.5 5. 4.5 4. 2 21 22 23 24 25 26 ource: tats Canada, 26 projected 5 45 4 35 3 25 2 15 1 5 U.. mports of Canadian Feeder Cattle 96 97 98 99 1 2 3 4 5 6 ource: U/P 25-6 Projected ince the mid-199 s excluding 22, feeder cattle and calf imports from Canada have averaged about 14, head per year. uring 22, more than 45, feeder cattle and calves were shipped to the U.. because of high feeding costs in Canada due to drought. U.. feeder cattle and calf imports from Canada are expected to total 35, to 4, head during 26. The U.. exported an average of 131, head of feeder cattle and calves per year to Canada from 1998 through 22, but exports are expected to be small during 26. Cattle Market ituation -- Page 5
17 15 13 11 9 7 5 3 U.. mports of Mexican Feeder Cattle The U.. is expected to import about 1.3 million head of feeder cattle and calves from Mexico during 25. igh U.. cattle prices and no feeder imports during much of the year from Canada prompted the imports. mports are expected to moderate to about 1.1 million head during 26. 1 93 94 95 96 97 98 99 1 2 3 4 5 6 ource: U/P 25/6 projected 9 8 7 6 5 4 3 U.. mports of Canadian Fed teers & eifers Fed cattle imports from Canada averaged about 723, head from 1998 through 22. mports are expected to rebound during 26 and total about 65, head for the year. 2 1 98 99 1 2 3 4 5 6 ource: U/P 25-6 Projected M 31 3 29 28 27 26 25 teer and eifer laughter teer and heifer slaughter during 25 was basically flat with year earlier levels. The cycle peak in steer and heifer slaughter occurred in 2 and totaled 3.1 million head. uring 26, steer and heifer slaughter is expected to total between 27.5 and 28. million head up at least 5, head from 25 levels. From 26 to 21, steer and heifer slaughter is expected to increase by about two-million head due to cow herd expansion and growing feeder cattle and calf supplies. 24 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 ource: U & Cattle-Fax 25-21 Projected Page 6 Cattle Market ituation
29 28 27 26 25 24 23 U.. eef Production U.. beef production totals were relatively flat during 25 and will total 24.6 billion pounds. Production is expected to increase by nearly one-billion pounds during 26 due primarily to larger steer and heifer slaughter. From 26 through 21, beef production is projected to increase more than two-billion pounds and is expected to be record large in 28 and 29. 22 21 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 ource: U & Cattle-Fax 25-21 Projected 3 28 26 24 Net eef upplies The 25 U.. net beef supply was nearly the largest on record and is expected increase by 2 to 3 million pounds during 26. U.. net beef supplies are projected to grow through the end of the decade. Regaining key beef export markets will be critical to moderating the expected increases in net beef supplies during the next several years. 22 2 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 ource: U & Cattle-Fax 25-21 Projected 22 2 18 16 14 Pork Production Pork production during 25 is expected to be record large and total 2.7 billion pounds up about 1% from a year earlier. Production during 26 is expected to be about 2% larger and total near 21. billion pounds. 12 1 8 82 84 86 88 9 92 94 96 98 2 4 6 ource: U; 25-6 Projected Cattle Market ituation -- Page 7
M 32 3 28 26 24 22 2 18 16 14 12 1 8 6 4 2 Pork xports 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 ource: U/R 25-6 Projected Pork exports grew more than 25% during 25 and were record large, totaling more than 2.7 billion pounds. Japan remains the largest export destination for U.. pork and accounted for about 4% of U.. pork exports during the year. Pork exports to Japan were up nearly 2% during 25. Mexico is the second largest purchaser of U.. pork, accounting for 22% of pork exports. 45 4 35 3 25 2 Poultry Production uring 25, broiler and turkey production grew by more than 1.3 billion pounds compared to 24 and totaled a record 4.6 billion pounds. Poultry production is expected to grow about 3% during 25 and total 42 billion pounds. uring the past 1 years poultry production has increased over 3%. 15 1 8 82 84 86 88 9 92 94 96 98 2 4 6 ource: U, 25-6 Projected 65 roiler xports, RTC M 55 45 35 25 15 5 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 ource: U 25-6 Projected Page 8 Cattle Market ituation
Cutout $/cwt $15 $145 $14 $135 $13 $125 $12 $115 $11 $15 $1 $95 nnual Cutout Price vs. Net eef upply 9391 92 94 95 97 96 98 5 3 4 $9 23. 24. 25. 26. 27. 28. 29. Net eef upply (billion pounds) 99 1 2 eef demand held most of the recent gains during 25. The net beef supply was basically equal with 24 levels and wholesale beef prices averaged just slightly higher. 26 beef demand levels are anticipated to be close to 24 and 25 levels. Retail Weight 8 75 7 65 6 Per Capita Net eef upply The net beef supply on a retail weight basis was steady in 25 with 24 levels. Per capita supplies are expected to be slightly larger in 26 and then remain basically flat through the end of the decade. Note that this measure has basically averaged 66 pounds for the past 15 years. 55 5 8 82 84 86 88 9 92 94 96 98 2 4 6 8 ource: U 25-8 projected Fed Price $9 $8 $7 $6 $5 $4 Fed Cattle Prices and Per Capita eef upply 199-22 23-26 Per capita beef supplies have been on the decline since the 197 s. t the same time, pricing has moved to new and higher plateaus in response to the smaller supplies 198' and improving demand. upplies are expected to increase slightly over the next several years and if the new range holds, fed cattle prices should be well supported 197's in the upper $7 s for annual averages. $3 55 6 65 7 75 8 85 9 Per Capita upply (pounds retail weight) Cattle Market ituation -- Page 9
75 U.. Consumer xpenditures on eef 7 65 $ 6 55 5 45 4 35 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 ource: U & Cattle-Fax omestic disappearance valued at all-fresh retail price, 25-6 projected Total Consumer pending (bil $) YR F PORK CCKN TURKY TOT 1987 37.66 22.52 16.53 3.76 8.47 1988 4.23 23.56 18.17 3.76 85.72 1989 41.94 23.52 2.74 4.22 9.42 199 44.11 26.46 21.66 4.36 96.59 1991 45.75 26.93 22.52 4.53 99.72 1992 45.31 26.83 23.86 4.46 1.46 1993 45.62 26.71 25.45 4.61 12.39 1994 46.27 27.35 26.3 4.65 14.58 1995 46.2 26.87 26.8 4.82 13.8 1996 45.7 28.81 28.31 5.12 17.94 1997 45.49 3.23 29.4 4.97 11.9 1998 46.64 34.48 3.51 5.13 116.76 1999 49.11 35.52 32.85 5.15 122.63 2 52.74 37.32 33.28 5.2 128.54 21 56.84 38.68 34.1 5.2 134.82 22 59.9 39.59 38.78 5.2 143.47 23 62.24 4.1 38.82 5.2 146.27 24 7.59 42.44 43.12 5.2 161.35 25* 71.3 42.48 42.4 5.3 161.12 26* 71.56 43.14 44.52 5.4 164.62 Page 1 Cattle Market ituation
Per Capita pending (dollars) 25 24 23 22 21 2 Per Capita eef pending and Consumption pending Consumption 19 187 18 178 181 177 175 176 176 171 17 17317167 169 162 166 16157 16 15 6 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 ource: U, 25-6 projected 199 214 27 95 24 24124 Per capita beef spending increased just 9 slightly during the year. xpectations are 85 for per capita consumption to level out over the next several years and for retail 8 prices to remain relatively flat. 75 7 65 Per Capita Consumption $ / C W T 175 165 155 145 135 Weekly verage Choice Cut-Out Price 25 24 Wholesale beef prices were slightly higher during 25 when compared to 24 levels. The Choice cutout averaged $144 during the year versus a $142 a year ago. 125 5-Yr avg. 115 J F M M J J O N ource: U 6-9 lbs WK O R 3.9 3.7 3.5 3.3 3.1 2.9 2.7 ll Fresh Retail eef Price Retail beef prices were relatively flat during 25. This price series averaged over 9 percent higher during 24 and has increased over 2 percent in the past four years. xpect retail beef prices to be mostly steady in 26. 2.5 2.3 93 94 95 96 97 98 99 1 2 3 4 5 ource: U MONT Cattle Market ituation -- Page 11
$ / C W T 95 93 91 89 87 85 83 81 79 77 75 Weekly verage Fed teer Price 24 25 73 J F M M J J O N ource: Cattle-Fax WK Fed cattle prices ranged from $94 at this year s highs to $78 at the lows. The annual average will be close to $86.5; a new record high for a year. Net beef supplies are at or very near record high levels while prices have made new annual average highs and beef demand remains on solid footing. Cattle feeding margins were positive by an average of $1-$15 per head for the year. $ / C W T 12 115 11 15 1 95 9 Weekly verage 75 lb Feeder teer Price 25 24 Feeder cattle price (75 lb) averages were record high during 25. Prices ranged from about $12 at the lows to $115 at the highs. tocker operators and backgrounders were highly profitable again this year. Prices have been well supported during most of the last 18 months near $15. ow cost of gain remains supportive to prices. 85 8 J F M M J J O N ource: Cattle-Fax Weeks $ / C W T 14 135 13 125 12 115 11 15 1 Weekly verage 55 lb teer Calf Price 24 25 55 lb steer calf prices spent most of 25 trading between $12 and $135. Prices were sharply higher during the first half of 25 compared to 24 but during the ugust-november time frame prices have been very similar to year earlier levels. Cow/calf producers are generating the most positive returns of any of the production segments and as a result the herd is expanding. 95 J F M M J J O N ource: Cattle-Fax Weeks Page 12 Cattle Market ituation
$ / 18 16 14 12 1 8 6 4 2-2 -4-6 -8-1 tocker Cattle Profit (oss) ummer Grazing Program 8 81 82 83 84 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 Purchased Feb-Mar at 5 lbs. ource: Cattle-Fax Marketed ep-oct at 75 lbs., 25-6 projected Cattle that have been bought this fall have an excellent chance of being profitable for next summer s grazing programs. ased on Cattle-Fax s current projections cattle bought this spring to be marketed in the fall should be just above a breakeven. Risk to the feeder market in the fall; due to grain prices, negative feeding margins, and larger supplies all could drive the margins for summer grazing programs to the negative side. Risk Management most likely will need to be incorporated for the summer stocker program. $ / C W T 125 115 15 95 85 75 65 55 Cattle-Fax 75 lb teer Price ong-term market trend is lower with cycle highs occurring in ugust 24 and the annual highs in 25 near $115. istorical resistance in the low $9 s will now be strong support for the next couple of years. very dollar change in corn prices per bushel is worth $7.5 change in feeder prices, long-term corn could be a factor to the feeder market. 45 8 81 82 83 84 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 MONT reakeven Purchase Price 75 lb teer Fed Price 74. 1.8 88.63 Corn Price $/bu 2. 2.2 2.4 2.6 2.8 86.98 85.33 83.68 82.3 8.38 78. 94.53 92.88 91.23 89.58 87.93 86.28 82. 1.43 98.78 97.13 95.48 93.83 92.18 86. 16.33 14.68 13.3 11.38 99.73 98.8 9. 112.23 11.58 18.93 17.28 15.63 13.98 94. 118.13 116.48 114.83 113.18 111.53 19.88 98. 124.3 122.38 12.73 119.8 117.43 115.78 Cattle Market ituation -- Page 13
$ / 25 2 15 1 5-5 Cow/Calf Returns igh Return Producer Cow-calf producers are expected to remain profitable for the next several years. owever, this is not the time for complacency as producers should focus on minimizing costs and maximizing returns. -1-15 ow Return Producer 8 82 84 86 88 9 92 94 96 98 2 4 6 ource: Cattle-Fax, 25-27 projected G-RTURN vs. OW-RTURN PROUCR G OW Percent Weaned 9% 88% There are a couple of key components when evaluating the difference between a high return and low return producer. The percent of calves weaned is one factor. trong herd health and nutrition programs are also mainstays of the high return producers. G-RTURN vs. OW-RTURN PROUCR G OW Weaning Weights 569 lbs 528 lbs fficient females are the foundation of high return producers. uperior genetics for both the sire and dam are also important. Weaned pounds per cow exposed are variables that high return producers work diligently at improving each year. Pounds Weaned Per Cow xposed 59 lbs 454 lbs Page 14 Cattle Market ituation
55 lb teer Calf to ull Ratio 29 28 27 26 P 25 24 R 23 C 22 21 N T 2 19 18 17 16 15 95 96 97 98 99 1 2 3 4 ource: Cattle-Fax Given the 55 lb steer price for 25 is to average near $127,and taking into account the ratio between calf and bull values, the historical relationship suggest bull values will be at higher levels during the bull sales of late this fall and into the first half of 26. Record high levels are expected, but these values should decline during the next several years. $ / $5. $45. $4. $35. $3. $25. $2. $15. $1. ifference etween a red Cow and 55 lb teer Cow values as compared to calf values are in line with the cycle, as beef cow supplies are at their tightest point, the premium is being paid on the cows. This spread will narrow going into the downtrend of the cycle during the next few years. $5. 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 ource: Cattle-Fax 16 easonal Cow laughter vs. Cow Prices 1995-24 verage 43 15 42 14 13 Cow Price 41 4 12 11 1 9 Cow laughter 39 38 37 36 8 J F M M J J O N ource: U WK 35 Cattle Market ituation -- Page 15
U $ / U 2.5 2. 1.5 1..5. 1.52 1.1 9/91 91/92 2.11.85 1.56.43.88 92/93 93/94 94/95 95/96 96/97 ource: U, 25/6 Oct. projection 3.2 3. 2.8 2.6 2.4 2.2 2. 1.8 nding tocks For U.. Corn 1.31 CROP 1.79 1.72 1.9 1.6 Weekly Omaha Cash Corn 5-Yr. avg. 24 1.9.96 2.1 2.2 97/98 98/99 99/ /1 1/2 2/3 3/4 4/5 5/6 1.6 25 1.4 J F M M J J O N ource: U WK Current U projections have U.. corn stocks growing 5% in 25/6. igher ending stocks in 25/6 are primarily attributed to the large carryover from 24/5. s demand continues to increase, ending stocks need to grow to maintain a comfortable level of supply. Omaha cash corn prices are expected to find support near $1.45 this fall. pring values could approach $1.8 and possibly $1.9-$2. if there are planting concerns. f production equals demand and there are record supplies of nearly 13 billion bushels, the annual average could range from $1.75-$1.85. ummary imited impact on fed cattle profitability, feeders and calves in 26. lthough corn yields continue to improve, total corn acres planted will be very critical in 26 if demand is anywhere near 11 billion bushels. arge supplies to limit rallies near term. emand will continue to grow. 11 billion crop necessary to maintain stocks. uch large demand + poor crop = higher prices. Page 16 Cattle Market ituation
29 U.. eef Production 4. eef mports & xports 28 27 26 25 24 23 22 21 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 ource: U & Cattle-Fax 25-21 Projected 3.5 3. 2.5 2. 1.5 1..5 xports mports. 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 ource: U, 25-1 Projected $ / 2.5 2. 1.5 1..5. -.5-1. -1.5-2. -2.5-3. Net Value of eef and Variety Meat Trade 95 96 97 98 99 1 2 3 4 5 ource U-F $ 75 U.. Consumer xpenditures on eef 7 65 6 55 5 45 4 35 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 ource: U & Cattle-Fax omestic disappearance valued at all-fresh retail price, 25-6 projected Retail Weight 8 75 7 65 6 55 Per Capita Net eef upply Required eef upply to Maintain 67 lbs per Capita Consumption 32 3 28 26 24 22 5 8 82 84 86 88 9 92 94 96 98 2 4 6 8 ource: U 25-8 projected 2 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 12 14 ource: U & Cattle-Fax 25-215 Projected Cattle Market ituation -- Page 17
FOUR P OF T CTT CYC 1 Transition Years Prices Moving igher 4 Up Cycle igh Cattle Prices own Cycle ow Cattle Prices 2 Transition Years Prices Moving ower 3 The Cattle Price Cycle 23-25 We are here 1979 199-1991 29-21 1974-1976 1985-1986 1996-1998 Page 18 Cattle Market ituation
eef ndustry Concentration Cow/Calf Feedlot Packer Retail Consumer 8, producers average herd size 42 head 5 largest companies have 24 feedyards 65% market share 5 major packers 85% market share ig 1 retail chain 55% market share 29 million domestic 9% export Cattle Market ituation -- Page 19