Beef Cattle Market Update August 8, 2017 Dr. Scott Brown Agricultural Markets and Policy Division of Applied Social Sciences University of Missouri brownsc@missouri.edu http://amap.missouri.edu Twitter @MUScottBrown
Where Do Cattle Markets Go From Here? It has been a wild ride the last few years The pendulum has swung: too few cattle to perhaps too many Other meat supplies have followed suit We may be returning to what is a long-term normal Unfortunately this follows a sharp declines in cattle prices As unforeseen events caused recent volatility, more may occur The tug-of-war between supply and demand continues Recent demand performance and outlook is positive Abundant cattle supplies continue to exert market pressure
$ Per Cow ESTIMATED AVERAGE COW CALF RETURNS Returns Over Cash Cost (Includes Pasture Rent), Annual 500 400 300 200 100 0-100 19861988199019921994199619982000200220042006200820102012201420162018 Data Source: USDA-AMS, Compiled and Analysis by LMIC Livestock Marketing Information Center C-P-66 07/07/17
Economies of Scale Are Present In All Agricultural Sectors
MED. & LRG. #1 STEER CALF PRICES 400-500 Pounds, Southern Plains, Weekly 240 $ Per Cwt. 220 200 180 160 140 120 JAN APR JUL OCT Avg. 2011-15 2016 2017 Data Source: USDA-AMS Livestock Marketing Information Center C-P-49A 08/01/17
Beef Cows and Production 40 38 36 34 32 30 28 26 24 22 20 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 Beef Cows (Million Head) Beef Prod, t+2 (Billion Pounds)
Annual Change in Beef Cows, 2017 +22 +55 +50 +20-6 +20 +10 +12 +25 + 68 +13-9 +14 +33 + 82 + 150 +23 +50 + 172 +21-24 +20 + 170-8 +15-5 +14
Change in Beef Cows, 2017 vs. 2009-46 +59 +49 +85 +38 +69 +65 +25 +40-31 +60 +28-91 +6 +25-39 +57-710 - 67-32 + 25-39 -34
How Many More Beef Cows? 36 35 34 Million Head 33 32 31 30 29 28 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Beef Cow Inventory (p)
Weather Is Cooperating in Growing the Beef Cow Herd
Beef Cows in Drought-Affected States % of Total Beef Cows Top 30 States 50 40 30 20 10 0 Drought-affected here is defined as 40% or more of state in D2 or worse 00 02 04 06 08 10 12 14 16 17 (YTD)
The Known on Beef Cow Inventory 1500 1000 Million Head 500 0-500 -1000 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Change in Beef Cows Change in Cows (t-1) adjusted for slt.
July 2017 Cattle Report Actual % of 2015 All Cattle and Calves July 1 102,600 104 Annual Calf Crop Total Cows/Heifers Calved 36,300 41,900 106 105 Beef Cows/Heifers Milk Cows/Heifers 32,500 9,400 107 101 Heifers 500 lbs. + 16,200 103 For Beef Replacements For Milk Replacements Other Heifers 4,700 4,200 7,300 98 100 109 Steers 500 lbs. + Bulls 500 lbs. + Calves Under 500 lbs. Cattle on Feed 14,500 2,000 28,000 12,800 103 105 105 106
Cattle on Feed, 1000+ Capacity Lots 11.4 11.2 11.0 Million Head 10.8 10.6 10.4 10.2 10.0 9.8 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 2017 2016 2011-15 avg.
F.I. Dressed Cattle Weight 850 840 830 Pounds 820 810 800 790 780 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 2017 2016 2011-15 avg.
Meat Production and Trade, July WASDE Projected 2016 2017 2018 Production (billion lbs.) 97.3 100.3 102.7 Beef 25.3 26.6 27.1 Pork Chicken 25.0 40.3 25.9 41.0 26.8 41.8 Other 6.7 6.8 7.0 Exports (billion lbs.) 15.2 16.3 16.7 Beef Pork Chicken Other 2.6 5.2 6.6 0.8 2.8 5.7 7.0 0.8 2.9 6.0 7.0 0.8 Imports (billion lbs.) 4.5 4.3 4.2 Beef Pork Other 3.0 1.1 0.4 2.8 1.1 0.4 2.9 0.9 0.4
Meat Availability and Prices, July WASDE Projected 2016 2017 2018 Availability (lbs. / capita) 214.6 216.6 219.6 Beef 55.6 57.1 57.9 Pork Chicken 50.1 89.8 50.1 90.1 50.9 91.3 Other 19.1 19.3 19.5 Prices (cents / lb.) Fed steer Barrow and gilt Chicken Turkey 120.86 46.16 84.3 117.1 121-125 48-50 92-95 101-104 113-123 46-49 85-92 102-111
Meat Production Billion Pounds 44 40 36 32 28 24 20 16 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 Beef Pork Chicken (p)
How Does Trade Figure In? Change in Total Meat, Billion Lbs. 12 10 8 6 4 2 0 1990-94 1994-98 1998-02 2002-06 2006-10 2010-14 2014-18 (p) Production Net Trade 2017 2016 2015
More Meat for U.S. Consumers Still to Come 225 220 Pounds per Person 215 210 205 200 195 190 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Domestic Meat Availability (p)
US Beef Trade 400 350 Million Pounds 300 250 200 150 100 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Exports Imports
US BEEF EXPORTS TO MAJOR MARKETS Carcass Weight, Monthly Mil. Pounds 90 80 70 60 50 40 30 20 10 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 Japan Canada Mexico South Korea Data Source: USDA-ERS & USDA-FAS Livestock Marketing Information Center I-N-35 08/07/17
Global Beef Exports Million Metric Tons 12 10 8 6 4 2 0 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 U.S. India AU/NZ Brazil ROW
Beef Production Growth Percent Change vs. Previous Year 8 6 4 2 0-2 -4-6 -8 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 U.S. Rest of World
Growth Potential in China! Beef Consumption, Lbs./Person 90 80 70 60 50 40 30 20 10 0 U.S. Canada EU S. Korea Japan China/HK/TW
Feeder Steer as Share of Wholesale Value Percent 100 95 90 85 80 75 70 65 60 55 50 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
SLAUGHTER STEER PRICES Southern Plains, Weekly 150 $ Per Cwt. 140 130 120 110 100 90 JAN APR JUL OCT Avg. 2011-15 2016 2017 Data Source: USDA-AMS Livestock Marketing Information Center C-P-52 08/01/17
$ Per Head AVERAGE ANNUAL RETURNS TO CATTLE FEEDERS Feeding 750 Lb. Steers, S. Plains, Custom Feeding Total Costs 150 100 50 0-50 -100-150 -200-250 -300-350 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Data Source: USDA-AMS, Compiled and Analysis by LMIC Livestock Marketing Information Center C-P-10 07/05/17
Wholesale Value of Fed Steer/Heifer Beef Million Dollars 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 2010 2011 2012 2013 2014 2015 2016 2017 Branded/Choice Select/Ungraded Prime (right axis) 160 140 120 100 80 60 40 20
Boxed Beef Choice-Select Spread 35 30 25 Dollars per Cwt. 20 15 10 5 0 1 5 9 13 17 21 25 29 33 37 41 45 49 Week 2017 2016 2011-15 avg.
Cattle Prices Dollars per Cwt. 240 220 200 180 160 140 120 100 80 60 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 Fed Steer Feeder Steer (500-550 lb.) (p)
Cattle Prices Dollars per Cwt. 260 240 220 200 180 160 140 120 100 80 60 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Fed Steer Feeder Steers (500-550 lb) (p)
Takeaways Lower livestock prices will last a while The markets of 2014 and early 2015 will not return There is more beef coming, and lots of pork and chicken too There is reason for optimism Consumer demand for beef, especially higher quality, is solid Export potential bright due to China, other exporter struggles Keep an eye on the developing drought in N. Plains Beef cow numbers likely to grow a couple more years What can you do on your operation to take advantage?