Cattle and Beef Markets: Short and Long Run Challenges and Opportunities Derrell S. Peel Breedlove Professor of Agribusiness and Extension Livestock Marketing Specialist Oklahoma State University
Major Beef Market Factors Cattle Inventory and Beef Production Beef Demand International Trade Feed and Input Markets Forage Conditions
BOXED BEEF CUTOUT VALUE Choice 600-900 Lbs. Carcass, Weekly $ Per Cwt. 210 200 190 180 170 Avg. 2007-11 2012 160 150 2013 140 JAN APR JUL OCT C-P-62 04/29/13 Data Source: USDA-AMS
SLAUGHTER STEER PRICES Southern Plains, Weekly $ Per Cwt. 135 130 125 120 Avg. 2007-11 115 110 105 2012 100 95 90 2013 85 JAN APR JUL OCT C-P-52 04/29/13 Data Source: USDA-AMS
MED. & LRG. #1 FEEDER STEER PRICES 700-800 Pounds, Southern Plains, Weekly $ Per Cwt. 165 155 145 135 125 Avg. 2007-11 2012 115 105 2013 95 JAN APR JUL OCT C-P-49 04/29/13 Data Source: USDA-AMS, Compiled & Analysis by LMIC
FEEDER STEER vs FED STEER PRICES 700-800 Lbs. Minus Slaughter Steer, S. Plains, Weekly $ Per Cwt. 40 35 30 Avg. 2007-11 25 20 2012 15 10 5 JAN APR JUL OCT 2013 C-P-53 04/29/13 Data Source: USDA-AMS, Compiled & Analysis by LMIC
MED. & LRG. #1 STEER CALF PRICES 400-500 Pounds, Southern Plains, Weekly $ Per Cwt. 220 210 200 190 Avg. 2007-11 180 170 160 2012 150 140 130 2013 120 JAN APR JUL OCT C-P-49A 04/29/13 Data Source: USDA-AMS, Compiled & Analysis by LMIC
SLAUGHTER COW PRICES Southern Plains, 85-90% Lean, Weekly $ Per Cwt. 95 85 Avg. 2007-11 75 2012 65 55 2013 45 JAN APR JUL OCT C-P-35 04/29/13 Data Source: USDA-AMS
Mil. Head 140 JANUARY 1 TOTAL CATTLE INVENTORY U.S., Annual 130 120 110 2013 = 89.3 Million Head -1.6 Percent 100 90 80 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013 Data Source: USDA-NASS C-N-01 02/04/13
Mil. Head 40 JANUARY 1 BEEF COW INVENTORY U.S., Annual 2013 = 29.3 Million Head -2.9 Percent 38 36 34 Cyclical Expansion Cyclical Liquidation Drought Liquidation Cyclical Expansion Input Shock- Recession Liquidation Drought Liquidation 32 30 28 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 Data Source: USDA-NASS C-N-02 01/29/12
Mil. Head JANUARY 1 FEEDER CATTLE SUPPLIES Residual, Outside Feedlots, U.S. 40 35 30 25 20 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 Data Source: USDA-NASS C-N-30 02/04/13
Mil. Head 7.0 HEIFERS HELD AS BEEF COW REPLACEMENTS January 1, U.S. 6.5 6.0 +1.9 % 5.5 5.0 4.5 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 Data Source: USDA-NASS C-N-38 02/04/13
Mil. Head 118 113 108 103 98 BEEF PRODUCTION vs. CATTLE INVENTORY Inventory on January 1, U.S. Commercial Beef Production Bil. Pounds 28 27 26 25 24 93 88 Total Cattle Inventory 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 23 22 Data Source: USDA-AMS, Compiled & Analysis by LMIC M-S-23 08/10/12
Cattle Slaughter, Annual Million Head 37 36 35 34 33 32 31 30 29 28 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Data Source: USDA-NASS, Compiled & Analysis by LMIC M-S-03A 01/29/13
U S ALL HAY STOCKS December 1 Mil. Tons 120 110 100 90 80 70 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Data Source: USDA-NASS, Compiled & Forecasts by LMIC G-NP-22 01/11/13
Hay Price, $/ton $210.00 $190.00 $170.00 $150.00 $130.00 $110.00 $90.00 $70.00 $50.00 1982 1987 1992 1997 2002 2007 2012 All Hay Alfalfa Other Hay
Percent 70 US RANGE AND PASTURE CONDITION Percent Poor and Very Poor, Weekly 60 50 40 30 Avg. 2007-11 2012 2013 20 10 May Jul Sep Data Source: USDA-NASS, Compiled & Analysis by LMIC G-NP-30 05/06/13
Percent 45 SOUTHEAST REGION RANGE AND PASTURE CONDITION Percent Poor and Very Poor, Weekly 40 35 30 25 20 15 Avg. 2007-11 2012 2013 10 5 0 May Jul Sep Data Source: USDA-NASS, Compiled & Analysis by LMIC G-NP-36 05/06/13
Percent 80 CORNBELT REGION RANGE AND PASTURE CONDITION Percent Poor and Very Poor, Weekly 70 60 50 40 30 Avg. 2007-11 2012 2013 20 10 0 May Jul Sep Data Source: USDA-NASS, Compiled & Analysis by LMIC G-NP-34 05/06/13
Percent 90 GREAT PLAINS REGION RANGE AND PASTURE CONDITION Percent Poor and Very Poor, Weekly 80 70 60 50 40 30 Avg. 2007-11 2012 2013 20 10 0 May Jul Sep Data Source: USDA-NASS, Compiled & Analysis by LMIC G-NP-32 05/06/13
Percent 80 SOUTHERN PLAINS REGION RANGE AND PASTURE CONDITION Percent Poor and Very Poor, Weekly 70 60 50 40 30 Avg. 2007-11 2012 2013 20 10 May Jul Sep Data Source: USDA-NASS, Compiled & Analysis by LMIC G-NP-33 05/06/13
Percent 75 WESTERN REGION RANGE AND PASTURE CONDITION Percent Poor and Very Poor, Weekly 65 55 45 35 Avg. 2007-11 2012 2013 25 15 May Jul Sep Data Source: USDA-NASS, Compiled & Analysis by LMIC G-NP-31 05/06/13
Mil. Pounds 550 BEEF PRODUCTION Federally Inspected, Weekly 525 500 Avg. 2007-11 475 450 2012 425 400 375 2013 JAN APR JUL OCT Data Source: USDA-AMS & USDA-NASS M-S-18 04/29/13
Thou. Head 720 670 CATTLE SLAUGHTER Federally Inspected, Weekly Avg. 2007-11 620 570 2012 520 2013 470 JAN APR JUL OCT Data Source: USDA-AMS & USDA-NASS C-S-08 05/03/13
STEER DRESSED WEIGHT Federally Inspected, Weekly Pounds 890 880 870 860 Avg. 2007-11 850 840 2012 830 820 810 2013 800 JAN APR JUL OCT Data Source: USDA-AMS & USDA-NASS C-S-18 05/03/13
BEEF COW SLAUGHTER Federally Inspected, Weekly Thou. Head 85 80 75 70 65 60 Avg. 2007-11 2012 55 50 2013 45 JAN APR JUL OCT Data Source: USDA-AMS & USDA-NASS C-S-34 05/03/13
TOTAL COW SLAUGHTER Federally Inspected, Weekly Thou. Head 155 145 135 125 115 Avg. 2007-11 2012 105 95 2013 85 JAN APR JUL OCT Data Source: USDA-AMS & USDA-NASS C-S-14 05/03/13
Bil. Pounds 3.0 U S BEEF AND VEAL EXPORTS Carcass Weight, Annual 2.5 2.0 1.5 1.0 0.5 0.0 1989 1992 1995 1998 2001 2004 2007 2010 2013 Data Source: USDA-ERS & USDA-FAS, Compiled & Analysis by LMIC I-N-06 04/28/13
MAJOR U S BEEF EXPORT MARKETS Carcass Weight, Annual Mil. Pounds 700 600 500 400 Avg. 2006/10 2011 300 200 2012 100 0 Japan Canada Mexico Korea I-N-18 05/01/13 Data Source: USDA-ERS & USDA-FAS, Compiled & Analysis by LMIC
MAJOR U S BEEF IMPORT SOURCES Carcass Weight, Annual Mil. Pounds 900 800 700 600 500 400 300 200 100 0 Australia New Zealand Canada Mexico Avg. 2006/10 2011 2012 Data Source: USDA-ERS & USDA-FAS, Compiled & Analysis by LMIC I-N-36 05/01/13
U S BEEF AND VEAL IMPORTS Carcass Weight, Annual Bil. Pounds 4.0 3.5 3.0 2.5 2.0 1.5 1989 1992 1995 1998 2001 2004 2007 2010 2013 I-N-12 04/28/13 Data Source: USDA-ERS & USDA-FAS, Compiled & Analysis by LMIC
United States: Beef Trade 2013-2014 Projected 1,000 METRIC TONS 1800 1600 1400 1200 1000 800 600 400 200 0 2001 2002 2003 2004 2005 2006 2007 2008 Exports 2009 Imports 2010 2011 2012 2013 2014
CATTLE IMPORTS FROM MEXICO Annual Thou. Head 1800 1600 1400 1200 1000 800 600 400 1987 1990 1993 1996 1999 2002 2005 2008 2011 Data Source: USDA-ERS & USDA-FAS, Compiled & Analysis by LMIC I-N-17 05/01/13
U S CATTLE IMPORTS FROM MEXICO Monthly Thou. Head 205 185 165 145 125 105 85 65 45 25 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Avg. 2007-11 2012 2013 Data Source: USDA-ERS & USDA-FAS I-N-03 05/03/13
CORN ACREAGE 100 95 Acres Planted (million) 90 85 80 75 70 65 60 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Data Source: USDA-NASS, Compiled & Analysis by LMIC
Bu. Per Acre NATIONAL AVERAGE CORN YIELD Crop Year 160 140 120 100 80 60 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Data Source: USDA-NASS, Compiled & Forecasts by LMIC G-NP-04 03/28/13
U S ANNUAL CORN PRODUCTION Crop Year Bil. Bushels 16 14 12 10 8 6 4 2 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Data Source: USDA-NASS, Compiled & Forecasts by LMIC G-NP-07 03/28/13
$ Per Bushel 8.00 NATIONAL AVERAGE CORN PRICE Crop Year, Received by Farmers 7.00 6.00 5.00 4.00 3.00 2.00 1.00 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Data Source: USDA-NASS, Compiled & Forecasts by LMIC G-NP-03 03/28/13
Mil. Head 12.0 CATTLE ON FEED US Total, Monthly 11.5 Avg. 2007/11 11.0 2012 10.5 10.0 2013 9.5 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC C-N-10 04/19/13 Data Source: USDA-NASS
$ Per Cwt 145 135 125 115 105 95 CHOICE STEER PRICE vs BREAKEVEN Cattle Feeding, S. Plains, Monthly Latest Data: April 2013 Steer Price Breakeven 85 75 2005 2006 2007 2008 2009 2010 2011 2012 2013 Projected Breakeven Data Source: USDA-AMS & USDA-NASS, Compiled & Analysis by LMIC C-P-21 05/06/13
$ Per Head 275 225 175 125 75 25-25 -75-125 -175-225 -275-325 AVERAGE RETURNS TO CATTLE FEEDERS Feeding 725 Lb. Steers, S. Plains, Monthly Latest Data: April 2013 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Data Source: USDA-AMS & USDA-NASS, Compiled & Analysis by LMIC C-P-22 05/06/13
2013 Cattle Market Expectations Cattle and beef prices pushed higher by limited supplies Beef production down by 4.0-4.5% Beef demand will limit price increases Question is How much higher? Moderation in feed prices Higher cow and heifer prices (if no drought) Breeding cow and heifer demand
Corn Price Crop year average, 1960-2013 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2012, 2013 Projected
It is often said: The Beef Industry Can Survive High Corn Prices Better Than the Pork and Poultry Industries True statement? What are the implications for the beef industry?
Feedlot Cost of Gain Kansas, $/cwt. 140.00 130.00 120.00 110.00 100.00 90.00 80.00 70.00 60.00 50.00 40.00
Cost per Pound of TDN, Cents/lb. $18.00 $16.00 $14.00 $12.00 $10.00 $8.00 $6.00 $4.00 $2.00 1982 1987 1992 1997 2002 2007 2012 Corn Hay Source: Nevil Speer. Based on corn at 88% and hay at 55% TDN
Permanently Higher Grain Prices is a Game Changer for the Beef Industry Change from grain intensive to forage intensive to maintain competitiveness Must emphasize ruminant advantages Enhanced role for stocker production Influence on production systems Animal genetics (change animal size?) Type and use of technology? Better forage management New forages? New forage systems? Industry infrastructure (location and capacity) Different feeding industry? Regional shifts in cattle feeding, cow-calf and stocker production
$ Per Cwt ANNUAL AVERAGE CATTLE PRICES Southern Plains 175 155 135 115 95 75 500-600lb Steer Calves 700-800lb Feeder Steers Fed Steers 55 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Data Source: USDA-AMS, Compiled & Analysis by LMIC C-P-06 05/01/13
Cattle Sector Implications Cow-calf Good profit potential; cost management key Rebuilding strategy and costs Producer transition Stocker Good value of gain Feedlots and packers will continue to struggle Loss of capacity likely Production challenges bigger than marketing challenges
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