Where s The Beef??? Ruminating On The Cattle Cycle Gary Brester Dept. of Agricultural Economics and Economics Montana State University 2012 Animal Nutrition Conference Bozeman, MT April 17, 2012 1
OUTLINE 1. History 2. Current Situation 3. Hypotheses 4. Research Strategy 5. Comments 2
OUTLINE 1. History 2. Current Situation 3. Hypotheses 4. Research Strategy 5. Comments 3
U.S. Cattle Inventory (January 1) 150 125 Million Head 100 75 50 25 0 1867 1873 1879 1885 1891 1897 1903 1909 1915 1921 1927 1933 1939 1945 1951 1957 1963 1969 1975 1981 1987 1993 1999 2005 2011 Cattle Inventory (million head) Source: Livestock Marketing Information Center & MSU Agricultural Marketing Policy Center 4
U.S. Cattle Inventory (January 1) Million Head 150 125 100 75 50 25 1867 1873 1879 1885 1891 1897 1903 1909 1915 1921 1927 1933 1939 1945 1951 1957 1963 1969 1975 1981 1987 1993 1999 2005 2011 Cattle Inventory Price of Feeder Cattle 130 110 90 70 50 30 10-10 -30-50 -70 Dollars per Cwt Source: Livestock Marketing Information Center & MSU Agricultural Marketing Policy Center 5
U.S. Cattle Inventory (January 1) Million Head 150 125 100 75 50 25 1909 1915 1921 1927 1933 1939 1945 1951 1957 1963 1969 1975 1981 1987 1993 1999 2005 2011 Cattle Inventory Price of Feeder Cattle 130 110 90 70 50 30 10-10 -30-50 -70 Dollars per Cwt Source: Livestock Marketing Information Center & MSU Agricultural Marketing Policy Center 6
Nominal Fed And Feeder Cattle Prices $/cwt 160 140 120 100 80 60 40 20 0 Nebraska Direct 1100-1300 lb Choice Steers Montana 500-600 lb Steers 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Fed Cattle Feeder Cattle Source: Livestock Marketing Information Center & MSU Agricultural Marketing Policy Center 7
Real Fed And Feeder Cattle Prices $/cwt 300 270 240 210 180 150 120 90 60 Nebraska Direct 1100-1300 lb Choice Steers Montana 500-600 lb Steers 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 Real Fed Cattle 1990 1992 1994 1996 1998 2000 2002 Real Feeder Cattle 2004 2006 2008 2010 Source: Livestock Marketing Information Center (2011=100) 8
OUTLINE 1. History 2. Current Situation 3. Hypotheses 4. Research Strategy 5. Comments 9
US Beef Production vs. Cattle Inventory (January 1) Bil. Pounds 28 26 24 22 20 18 16 Mil. Head 140 130 120 110 100 90 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Cattle Inventory "U.S. Beef Production" 2012 January 1 Inventory equals 90.77 million head (decline from 2011 inventory of 92.68 million head) (2011 calf crop is lowest since 1950) Source: Livestock Marketing Information Center & MSU Agricultural Marketing Policy Center 10
Productivity of U.S. Beef Cow Breeding Herd Lbs 750 Carcass Weight Pounds Per Beef Cow, Annual 700 650 600 550 500 450 400 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Source: Livestock Marketing Information Center & MSU Agricultural Marketing Policy Center 11
U.S. Demand for Beef Choice Retail Beef Demand Index (1980=100) 100 100 95 90 88 87 84 80 80 70 77 69 68 64 63 61 60 58 56 55 54 52 50 50 52 52 54 54 56 61 58 55 56 53 51 50 52 50 40 30 20 10 0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Source: Glynn Tonsor, Kansas State University 12
Price ($/cwt) 115 110 105 100 95 90 85 80 75 70 65 60 Demand for Fed Cattle U.S. Fed Steer Price vs. U.S. Beef Supply 93 90 92 91 12 94 95 24 25 26 27 28 29 30 31 11 96 Beef Supply (billion lbs) 10 04 09 03 98 05 97 08 07 06 01 00 02 99 13
U.S. Beef, Veal and Live Animal Imports Billion Lbs 5 4 3 2 1 0 Annual, Billion Lbs, Carcass Weight Basis 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Total Canada Mexico Source: Livestock Marketing Information Center & MSU Agricultural Marketing Policy Center 14
U.S. Beef, Veal and Live Animal Exports Billion Lbs 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Annual, Billion Lbs, Carcass Weight Basis 1974 1976 1978 1980 1982 1984 1986 1988* 1990 1992 1994** 1996 1998 2000 2002 2004 2006 2008 2010 *CUSTA **NAFTA Total Source: Livestock Marketing Information Center & MSU Agricultural Marketing Policy Center 15
Value of U.S. Beef, Veal and Live Animal, By-Product Net Imports/Exports *CUSTA Million $ 4,000 3,000 2,000 1,000 0-1,000-2,000 1982 1985 1988* 1991 1994** 1997 2000 2003 2006 2009 **NAFTA Total Source: Livestock Marketing Information Center & MSU Agricultural Marketing Policy Center 16
World Beef Production Million Metric Tons 60 58 56 54 52 50 48 46 44 42 40 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Production (Carcass Weight) Source: Foreign Agricultural Service 17
World Cattle Inventories Million Head 1,200 1,150 1,100 1,050 1,000 950 900 850 800 750 700 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 World Cattle Inventory Source: Foreign Agricultural Service 18
World Cattle Inventory and Beef Production Million Head 350 300 250 200 150 100 50 Million Metric Tons 14 12 10 8 6 4 2 0 0 Argentina Australia Brazil Canada China Inventory Columbia EU-27 India Production Russia United States Source: Foreign Agricultural Service 19
India, Brazil, China Cattle Inventories Million Head 325 300 275 250 225 200 175 150 125 100 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 India Brazil China Source: Foreign Agricultural Service 20
U.S., Argentina, Australia, EU-27, Canada Inventories Million Head 100 90 80 70 60 50 40 30 20 10 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 U.S. Argentina EU-27 Canada Australia Source: Foreign Agricultural Service 21
OUTLINE 1. History 2. Current Situation 3. Hypotheses 4. Research Strategy 5. Comments 22
Weather Related 1. Over the past 15 years, drought has occurred in the a. West b. Southeast c. Southern Plains 2. Recent high hay prices 23
Structure of Cattle Production 1. Hog cycles no longer exist a. Vertically coordinated production processes reduces entry and exit 2. Have alliances, vertical coordination, contracting caused the same result in the cattle industry? 24
Technological Change 1. Labor has become more expensive for all of production agriculture (and elsewhere) 2. Technological change has allowed crop producers to substitute capital for labor a. Wider b. GPS c. Contract hire 3. Technological change has not helped cattle producers to the same extent 25
Crop Insurance 1. Livestock have been used to reduce risk through income diversification 2. Widely available and heavily subsidized crop insurance provides a less expensive way to do the same a. Much less labor intensive b. Age profiles 26
Grazing Limitations 1. Reductions in public grazing access? 2. Reductions in private grazing access? 3. Larger cows need more grass 27
OUTLINE 1. History 2. Current Situation 3. Hypotheses 4. Research Strategy 5. Comments 28
Research Strategy 1. Consider changes in herd sizes 2. Evaluate changes by state 3. Incorporate purchases of crop insurance 4. Consider labor costs 5. Range conditions over time 6. Public grazing AUMs 29
COMMENTS Picture Courtesy of Clint Peck 30