Red Meat and Poultry Outlook Curt Lacy Extension Economist-Livestock
Overview Current meat S&O Beef S&O Pork Poultry
Livestock producers situation
Red Meat and Poultry in Cold Storage Total number 9% higher compared to 07. Red meat unchanged Beef -9% Pork +8% Poultry +16% Chicken +12% Turkey +23% Millions 2.50 2.00 1.50 1.00 0.50 0.00 JAN MAR MAY JUL SEP NOV JAN MAR MAY JUL BEEF PORK POULTRY
Pork and Beef prices are higher compared to last year. Pork cutout has been record high lately $ Per Cwt. 100 95 90 HOG CUTOUT VALUE Weekly Major strength from hams and loins. Ribs and bellies are off from 2007. 85 80 75 70 65 60 55 JAN APR JUL OCT Avg. 2002-06 2007 2008
Pork and Beef prices are higher compared to last year. Beef below last year for most of 2008. High likely occurred in early July. $ Per Cwt. 185 175 165 155 145 BOXED BEEF CUTOUT VALUE Choice 600-900 Lbs. Carcass, Weekly Avg. 2002-06 2007 2008 135 125 JAN APR JUL OCT
Broiler wholesale prices have also been strong. SOME cost increases have been passed on. Cents Per Pound 90 85 BROILER PRICES 12-City Composite, Weekly However, pressure from pork and beef has prohibited passing all of those costs along. 80 75 70 65 60 JAN APR JUL OCT Avg. 2002-06 2007 2008
Total Meat Supplies are Higher Total + 4.7% YTD compared to 2007. Beef = +2.0% Poultry +4.4% Pork +9.5% Bil. Pounds 100.0 80.0 60.0 40.0 20.0 TOTAL RED MEAT & POULTRY PRODUCTION Quarterly OCT-DEC JUL-SEP APR-JUN JAN-MAR 0.0 Avg. 2002/06 2007 2008 M-S-31 07/14/08
Short Story More meat. Higher prices earlier in the year. However, a weak economy and burdensome supplies in Q2 and Q3 have conspired to depress wholesale prices.
Beef Cattle Situation & Outlook
$ Per Cwt. Feeder Cattle Situation A Tale of 2 Weights 125 120 115 MED. & LRG. #1 & 2 STEER CALF PRICES 400-500 Pounds & 700-800 Pounds, Georgia, Weekly Prices for calves and feeders have almost converged 110 105 100 95 90 85 80 75 JAN APR JUL OCT 700-800 400-500
Mil. Head 12.5 CATTLE ON FEED US Total, Monthly 12.0 11.5 11.0 Avg. 2002-2006 2007 10.5 10.0 2008 9.5 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Livestock Marketing Information Center Data Source: USDA/NASS C-N-10 09/19/08
Lower Cattle Supplies in the Fall Mil. Head 2.8 2.6 2.4 2.2 2.0 1.8 1.6 1.4 NET FEEDLOT PLACEMENTS US Total, Monthly JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Avg. 2002-06 2007 2008 Net Placements lower. Feeders weighing more than 800# up. Feeders weighing less than 600# down. Livestock Marketing Information Center Data Source: USDA/NASS C-N-08 07/25/08
Projections for Remainder of 2008 and Early 2009 Quarter 400-500# Steers* 700-800# Steers* Live Cattle (5 Area) Cull Cows* 85-90% Q3-2008 $99-$105 $92-$98 $90-$95 $52-$58 Q4-2008 $90-$98 $85-$93 $85-$93 $42-$48 Q1-2009 $100-$110 $85-$95 $93-99 $46-$54 Q2-2009 $105-$120 $95-$103 $100-$107 $52-$60
2008/2009 Summary An improved economy would help beef demand. Larger total meat supplies in Q3 and Q4 could be troublesome. Corn crop (prices) vs. Live Cattle prices will continue to drive the train for feeder cattle prices.
Marketing Alternatives This Summer and Fall Current pricing scenario favors adding as much weight as possible. Stockering or backgrounding may be economical. Retained ownership may be profitable this year.
BEEF COWS THAT HAVE CALVED JANUARY 1, 2008 (1000 Head) 605 655 Alaska Hawaii 272 US Total 218 5.9 82.7 460 32553 365 1523 733 730 922 1644 1883 397 1015 165 2053 460 943 427 234 1511 2080 1159 5240 513 270 519 106 1079 677 292 202 553 197 158 936 692 VT 10 372 104 12 CT 6 NJ 9 DE 4 MD 44 NH 5 MA 9 RI 1.4 1,020 to 5,240 (9) 520 to 1,020 (11) 290 to 520 (9) 80 to 290 (11) 0 to 80 (10) Livestock Marketing Information Center Data Source: USDA/NASS C-N-15 02/01/08
CHANGE IN BEEF COW NUMBERS JANUARY 1, 2007 TO JANUARY 1, 2008 (1000 Head) 7 30-15 -45 Alaska -1 Hawaii -3 US Total -339 141-17 -8-13 -25 5-8 -30-2 -55 8-57 -4 0 0 21 5-10 11-18 -66-48 -10 20 53 22-74 -20-6 1-40 -32-63 23-14 0 1 1 MA 2 RI -0 CT -1 NJ 1 DE 0 MD -6 2 to 141 (13) 1 to 2 (3) -6 to 1 (13) -25 to -6 (11) -74 to -25 (10) Livestock Marketing Information Center Data Source: USDA/NASS C-N-28 02/01/08
Mil. Head JULY 1 BEEF COW INVENTORY U.S., Annual 50 45 40 Points to a January 1,2009 number lower than January 1, 2008 35 30 25 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 Livestock Marketing Information Center Data Source: USDA/NASS C-N-46 01/30/06
Drought and high inputs continue to cause herd reductions BEEF COW SLAUGHTER Federally Inspected, Weekly Thou. Head 80 75 70 Avg. 2002-06 65 60 2007 55 50 45 2008 40 JAN APR JUL OCT C-S-34 07/18/08
Fewer Cows = Smaller Calf Crop Fewer Supplies Mil. Head 55 50 CALF CROP U.S., Annual Smallest calf crop since 1952 45 40 35 30 1946 1951 1956 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 Livestock Marketing Information Center Data Source: USDA/NASS
$/ton Fertilizer Prices 1997-2008 (and 2009) $1,500 $1,300 $1,100 $900 $700 $500 $300 $100 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Apr-08 May-08 Sep-08 Jan-09 Nitrogen (AN) Phosphorous (DAP) Potash (Muriate)
$/Gallon Fuel Prices 1997-2008 $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 1997 1998 1999 2000 2001 2002 2003 2004 2005 Diesel (bulk) 2006 2007 2008 Jul-08
Impact of Fuel & Fertilizer Prices on Cost of Production $140 $120 $100 $80 $60 $40 $20 2002 2008 500# Calf ($/Cwt.) Hay ($/ton)
Incentives to Expand Beef Herd
Incentives to Expand Beef Herd
Projected Prices 2009 and Beyond $130 $120 $110 $100 $90 $80 $70 $60 $50 $40 2009 2010 2011 GA 500# steer GA 750# steer Choice fed steer GA Slaughter cow Source: USDA, LMIC and UGA
Other Issues Southeast More reliant on fertilizer Wider basis Increasing land values Increasing demand for beef from alternative production systems Natural Organic Grass-fed Increasing demand for locally produced foods Animal welfare MCOOL/NAIS
Pork Situation & Outlook
Pork Situation
Pork Situation Record supplies in 2008. UNBELIEVABLE export demand has supported prices. Historically high input prices have certainly taken a toll on profits.
Returns to farrow-finish hog producers have been negative for most of the past year! 50 40 30 20 10 0-10 -20-30 -40 2004 May Source: IA State University Sep 2005 May Sep 2006 May Sep 2007 May Sep 2008 May
Thou. Head HOG SLAUGHTER Federally Inspected, Weekly 2,500 2,300 2,100 Avg. 2002-06 2007 1,900 1,700 2008 1,500 JAN APR JUL OCT H-S-05 09/12/08
Mil. Pounds 530 PORK PRODUCTION Federally Inspected, Weekly 480 Avg. 2002-06 430 380 2007 330 2008 280 JAN APR JUL OCT M-S-19 09/15/08
BARROW AND GILT PRICES Iowa - So. Minnesota, Carcass Base Price, Weekly $ Per Cwt. 90 85 80 Avg. 2002-06 75 70 65 2007 60 55 50 2008 45 JAN APR JUL OCT Livestock Marketing Information Center H-P-09 08/14/08
U S NET PORK EXPORTS Carcass Weight, Monthly Mil. Pounds 480 430 380 330 280 230 180 130 80 30 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Avg. 2002-06 2007 2008 Livestock Marketing Information Center I-N-32 09/12/08
Pork Summary Record supplies of pork in 2008. Supplies will be reduced some in 2009. Packing capacity may be a concern this fall. Prices will be pressured this fall. Prices should be stable to higher next year. High input prices will continue to plague producers.
Poultry Situation and Outlook
Cents Per Pound 90 BROILER PRICES 12-City Composite, Weekly 85 Avg. 2002-06 80 75 2007 70 65 2008 60 JAN APR JUL OCT Livestock Marketing Information Center P-P-01 09/16/08
These prices do not tell the whole story! Breast prices are running 10.5% lower than last year. Leg and wing prices are carrying the water for broilers this year. Exports have played a major role in moving the dark meats. Cents Per Pound Cents Per Pound 180 80 75 170 70 160 65 150 60 140 55 50 130 45 120 40 110 35 JAN JAN WHOLESALE WHOLESALE CHICKEN CHICKEN BREAST LEG PRICES PRICES Skinless/Boneless, Northeast, Truckload, Weekly APR APR Northeast, Truckload, Weekly JUL JUL OCT OCT Avg. Avg. 2002-06 2002-06 2007 2007 2008 2008
Billion Pounds RTC 8 7 6 5 4 3 2 1 July 2008 forward EMI Analytics forecast US Broiler Exports, Annual Other Romania Korea Ukraine Cuba Lithuania Angola Taiwan Turkey Canada Mexico 0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 EMI Analytics, All Rights Reserved China Russia
cents/lb What s the impact of higher feed-grain prices on broilers? Since 2006 Corn prices up 67% Soybean meal prices up 206% Broiler costs up 137%. 85 80 75 70 65 60 55 US Broiler Production Cost (WOG basis) EMI Analytics model, weighted average, with OH & interest 2006 avg. 60 cents 2007 avg. 68 cents 2008 avg. 81 cents 2009 avg. 82 cents Sept 2008 forward forecast 50 45 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 EMI Analytics, All Rights Reserved
index (1998-2000 base) 25 US Broiler Average Profitability Index spot market prices, EMI Analytics model 20 15 10 5 0-5 -10 Sept 2008 forward forecast -15 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 EMI Analytics, All Rights Reserved
Production will be lower the rest of the year. Broiler egg sets down. Broiler chick placements down. Total production for 2008 will be up only 2.3%. Will actually see a decrease in production in 2009. 9600 9400 9200 9000 8800 8600 8400 8200 2006 2007 2008 2009 2010 Quarterly Broiler Production Projected
Poultry Price Forecast Broiler prices should remain in the lower $80s. Breast prices will continue to struggle. Legs and wing prices should stabilize. HOWEVER, disruptions in the export market could be very problematic.
Bil. Pounds TOTAL RED MEAT & POULTRY PRODUCTION Quarterly 24.0 23.0 22.0 Avg. 2002/06 2007 21.0 2008 20.0 19.0 JAN-MAR APR-JUN JUL-SEP OCT-DEC 2009 M-S-31 07/14/08
Red Meat and Poultry Summary Record meat supplies this year. Q3-Q4 could be a big problem for pork supplies. Smaller beef, pork and poultry supplies in 2009. Exports for all meats continue to be favorable. All meat prices should remain steady to improving for the remainder of this year and next year. HOWEVER, if the economy continues to weaken all bets are off.
QUESTIONS?