Beef Cattle Situation and Outlook Emmit L. Rawls Professor Agricultural Economics
Slaughter Steer Prices $ Per Cwt. 105 5 Market W eighted Average, Weekly 100 95 90 85 Avg. 2004-08 2009 80 75 2010 70 JAN APR JUL OCT Now in the mid $90s
Boxed Beef Cutout Value $ Per Cwt. 180 Choice 600-900 Lbs. Carcass, W eekly 170 160 150 Avg. 2004-08 2009 140 130 2010 120 JAN APR JUL OCT Wholesale values higher on reduced supplies
Steer Hide and Offal Value $ Per Cwt. 11.80 Live Animal Basis, W eekly 10.80 9.80 8.80 Avg. 2004-08 2009 7.80 6.80 2010 580 5.80 JAN APR JUL OCT Support from weaker dollar and recovering world economy
Tennessee 500-600 lbs Steer Prices 2009, 2010 and 5-yr average, weekly $ Per Cwt. 125 120 115 110 105 100 95 90 85 80 75 JAN APR JUL OCT 2005-2009 Avg 2009 2010
Tennessee 700-800 lbs Steer Prices 2009, 2010 and 5-yr average, weekly $ Per Cwt. 110 100 90 80 70 JAN APR JUL OCT 2005-2009 Avg 2009 2010
Slaughter Cow Prices $ Per Cwt. 65 Southern Plains, 85-90% Lean, Weekly 60 55 50 Avg. 2004-08 2009 45 40 2010 35 JAN APR JUL OCT
Omaha Corn Prices $ Per Bu. 4.50 Weekly 4.00 3.50 3.00 Avg. 2004-08 2009 250 2.50 2.00 2010 1.50 JAN On a new plateau APR JUL OCT
Other Hay $ Per Ton 115 Received by Farmers, U.S., Crop Year 110 105 Avg. 04/05-08/09 100 2009/10 95 90 2010/11 85 MAY JUL SEP NOV JAN MAR
Kansas Feedlot Closeouts $/cwt 95 Feeding Costs per Cwt, Steers 90 85 Avg. 2004/08 80 2009 75 70 2010 65 60 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Cattle Inventory July 1 2010 = 100.8 Million Head -1.2 Percent Cycle began in 90, peaked in 96 with cycle lows in early 04 After 2 years of increase, no change in 07, decrease in 08, 09 & 10
Beef Cows That Have Calved January 1, 2010 (1,000 head) 227 546 610 Alaska Hawaii US Total 237 5.4 81.2 1465 869 380 VT 10 440 1618 260 90 694 96 885 1781 221 160 389 288 338 714 190 1434 1968 1070 665 367 208 2073 997 502 937 183 503 669 524 499 5140 31376 958 11 NH 4 MA 8 RI 1.3 CT 5.5 NJ 10 DE 4 MD 41 890 to 5,140 (11) 440 to 890 (13) 160 to 440 (13) 0 to 160 (13)
Change in Beef Cow Numbers Jan. 1, 2009 to Jan 1., 2010 (1000 head) -44-29 -26-12 11-11 -8-5 5-19 4-40 10-70 0-16 -19 8-12 -6-14 -71 22-24 -44-10 46-17 8 35 18 31-5 12 1-12 Alaska -0-30 Hawaii -3-16 US Total -336 16 1-2 0 MA 1 RI -0 CT -1 NJ -1 DE 0 MD 2 2 to 46 (14) 1 to 2 (2) -10 to 1 (15) -17 to -10 (8) -71 to -17 (11) Due to drought and pasture moving to crops
Change in Beef Cow Numbers Jan. 1, 2001 to Jan 1., 2010 (1000 head) Alaska -44-170 Hawaii -42-66 -135 35 10-46 -189-151 11-100 10-13 -164-63 -8 13-17 -126-3 -6-90 -102 10-69 -48 13-37 160 14-35 -76-68 -90 2-325 0 26 US Total -2022-17 -30-2 0 0 MA 3 RI -0 CT -3 NJ 2 DE 0 MD 4 3 to 160 (12) -8 to 3 (12) -68 to -8 (13) -325 to -68 (13) Impact of drought in western states and Southeast
Beef Cow Slaughter Thou. Head 95 Federally Inspected, Weekly 85 75 Avg. 2004-08 65 2009 55 45 2010 35 JAN APR JUL OCT Why: High cow prices, cash flow needs
Heifers Held As Beef Cow Replacements July 1 Mil. Head 7.0 6.5 6.0 5.5 50 5.0-2.2 % 4.5 4.0 3.5 3.0 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 Smaller cow herd ahead
Cow-Calf Returns and Cattle Inventory $ Per Cow Mil. Head 150 115 100 110 50 105 0 100-50 95-100 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 90 Cow-Calf Returns Cattle Inventory Jan 1 Low returns and droughts caused herd to decline
Feeder Cattle Supplies July 1 Mil. Head 55 Residual, Outside Feedlots, U.S. 50 45 40 35 30 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 Down 2.6% from July 09
Beef Demand: Choice Minus Select Beef Prices $ Per Cwt. 16 14 12 10 Carcass Cutout Value 600-900 Lbs., Weekly 8 Avg. 2004-08 6 4 2 0-2 JAN APR JUL OCT Consumers shifting to lower priced cuts/grades due to economy Higher % Choice cattle 2009 2010
Beef Demand: Wholesale Beef Ribeye Prices $ Per Cwt. 770 Boneless, Light, Weekly 720 670 620 570 Avg. 2004-08 2009 520 470 2010 420 JAN APR JUL Again prices lower than average shift in purchases, currently $511 OCT
Beef Demand: Wholesale Beef Chuck Prices $ Per Cwt. 190 Boneless 2 Piece, Weekly 180 170 160 150 140 130 120 Avg. 2004-08 2009 2010 110 JAN APR JUL OCT Stronger prices, but cheaper cuts, currently $172
Monthly US Beef Exports 000 Pounds, CWE Source: Daily Livestock Report
Japan s Share of U.S. Beef Exports 60% 50% 40% 30% 20% 10% 0% 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
Beef Demand Impacted by Food safety recalls Concerns about heart disease Nutrition information Female employment outside the home Convenience Source: Kansas State University Mintert, Tonsor & Schroeder
Beef Demand Consumers value convenience Consumers respond to new products that meet their needs Consumers are receptive to information about health and nutrition Consumers expect beef to be safe Source: Kansas State University Mintert, Tonsor & Schroeder
Commercial Beef Production Bil. Pounds 6.8 Quarterly 6.6 6.4 Avg. 2004/08 6.2 2009 60 6.0 5.8 5.6 JAN-MAR APR-JUN JUL-SEP OCT-DEC 2010 2011 Smaller herd, reduced production
Total Red Meat & Poultry Production Bil. Pounds 24.0 Quarterly 23.0 Avg. 2004/08 22.0 2009 21.0 2010 20.0 JAN-MAR APR-JUN JUL-SEP OCT-DEC 2011 Expansion in poultry is offsetting reduction in beef and pork
Factors Driving Feeder Cattle Prices Expected fed cattle price Current fed cattle price Distant futures Expected cost of gain Currently $0.70 0.80 Returns to cattle feeders Forage availability Weather
Impact of Corn Price on Price of Feeder Cattle 25 change in corn price changes price of 550 lbs feeder $2.50/cwt 25 change in corn price changes price of 700 lb feeder $1.00/cwt Assumes constant fed cattle price
Impact of Corn Price on Cost of Feedlot Gain Cost of gain (COG) in feedlots $3 corn = $70 COG $4 corn = $80 COG $5 corn = $90 COG $6 corn = $100 COG $7 corn = $110 COG Source: Harlan Hughes
Returns from Finishing Yearling Steers
Choice Steer Price vs Breakeven $ Per Cwt 110 105 100 95 90 85 80 75 70 65 60 Cattle Feeding, S. Plains, Monthly Latest Data: July2010 2002 2003 2004 2005 2006 2007 2008 2009 2010 Steer Price Breakeven Projected Breakeven
Fed Cattle Price Forecasts USDA-ERS* UT Futures August 13 ------------------------- $/cwt ------------------------- Jul Sept 94-96 90-92 Aug 94.32 Ot Oct Dec 92-9898 91-9494 Ot9507 Oct 95.07 Jan Mar 93-101 89-94 Dec 97.32 Apr Jun 96-104 94-99 Feb 98.85 Apr 100.10 * August 13, 2010
What Can A Feedlot Pay For 700 lbs. Steers To Be Sold At 1200 lbs.? Expected Sale Price ($/cwt) $ 95 $ 100 Sale wt (lbs) x 1200 x 1200 Gross Sale Value ($/hd) $ 1140 $ 1200 Cost of Gain @ $0.75/lb 500 lbs gain -375-375 Max Dollars for Feeder ($/hd) $ 765 $ 825 Return to Risk & Management ($/hd) -25-25 Max Dollars for Feeder ($/hd) $ 740 $ 800 Max Price for Delivered 700 lbs Steer ($/cwt) $ 105.71 $ 114.29 Less Trucking ($/cwt) - 6.00-6.00 TN Price ($/cwt) $ 99.71 $ 108.29
What Can A Feedlot Pay For 700 lbs. Steers To Be Sold At 1200 lbs.? Expected Sale Price ($/cwt) $ 100 $ 100 Sale wt (lbs) x 1200 x 1200 Gross Sale Value ($/hd) $ 1200 $ 1200 Cost of Gain @ $0.75/lb ($0.85/lb) 500 lbs gain -375-425 Max Dollars for Feeder ($/hd) $ 825 $ 775 Return to Risk & Management ($/hd) -25-25 Max Dollars for Feeder ($/hd) $ 800 $ 750 Max Price for Delivered 700 lbs Steer ($/cwt) $ 114.29 $ 107.14 Less Trucking ($/cwt) - 6.00-6.00 TN Price ($/cwt) $ 108.29 $ 101.14
Feeder Cattle Forecasts Steers M-1 700-800 lbs* 500-600 lbs** Jul-Sep 105-110 110-115 Oct-Dec 100-105 105-110 Jan-Mar 98-105 110-115 Apr-Jun 105-110 110 115-120 120 * Load Lots ** Auction Cattle
Futures Based Forecasts Feeder Cattle - 650-800 lbs M-1 Steers August 13 Aug 111.70 Sept 111.30 Ot Oct 111.42 Nov 111.82 Jan 111.70 Feb 111.45 Not Adjusted For Basis
What About Stockers? Strategies Intensive grazing Reduce hay/feed waste Take advantage of seasonal feed prices Buy in bulk, shop around Manage price risk on feed and cattle
Corn Gluten Feed Pellets Cash Seasonal Price Index, 2001-2006 110% Memphis 105% +6% +5% +2% +2% +4% +5% 100% -1% 95% -3% -4% -4% -4% 90% -7% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Soybean Hulls Cash Seasonal Price Index, 2001-2006 120% Memphis 115% 110% 105% 100% +11% +8% +2% +1% +6% +7% +9% 95% 90% 85% 80% -4% -4% -12% -10% -15% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
What About Stockers? Strategies Intensive grazing Reduce hay/feed waste Take advantage of seasonal feed prices Buy in bulk, shop around Manage price risk on feed and cattle Consider retained ownership Market as load in on-farm, video or thru a graded sale
What About Stockers? Buy em cheap Keep em alive Feed em cheap Sell em high
Retained Ownership Freight to feedlot pay anyway Added risk both production and price Opportunity to capture full value due to grade, gain, age & source Again price risk management for feed and cattle important
Take Home Message Cattle cycle stalled Cow calf returns will be higher in 11 Beef production up 1.6% in 11 Beef fdemand dcould struggle until unemployment declines Higher feed cost than 10 Contraction in beef & pork Poultry expansion
Take Home Message Tight credit an issue Beef exports a big plus Exports value of dollar/politics Hedge funds may continue to create market volatility Excess capacity in feedlot & packing business will force contraction/consolidation
Take Home Message Some shift in feeding to mid-west Check out the new Livestock Risk Protection Insurance
The End elrawls@utk.edu www.tnbeefcattleinitiative.org