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. 2007-11 160 150 2013 140 JAN APR JUL OCT C-P-62 04/08/13 Data Source: USDA-AMS
$ Per Cwt. 135 130 125 120 115 110 105 100 95 90 85 SLAUGHTER STEER PRICES 5 Market Weighted Average, Weekly JAN APR JUL OCT Avg. 2007-11 2013 Data Source: USDA-AMS
MED. & LRG. #1 FEEDER STEER PRICES 700-800 Pounds, Billings, Weekly $ Per Cwt. 175 165 155 Avg. 2007-11 145 135 125 115 105 2013 95 JAN APR JUL OCT Data Source: USDA-AMS, Compiled by LMIC 04/01/13
MED. & LRG. #1 STEER CALF PRICES 500-600 Pounds, Billings, Weekly $ Per Cwt. 200 190 180 Avg. 2007-11 170 160 150 140 130 120 2013 110 JAN APR JUL OCT Data Source: USDA-AMS, Compiled by LMIC 04/01/13
SLAUGHTER COW PRICES Southern Plains, 85-90% Lean, Weekly $ Per Cwt. 95 85 Avg. 2007-11 75 65 55 2013 45 JAN APR JUL OCT C-P-35 04/08/13 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 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
Million Head 30.0 29.0 28.0 27.0 26.0 25.0 24.0 23.0 Yearling and Cow Slaughter, Annual 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 7.5 7 6.5 6 5.5 5 4.5 Yearlings Yrlg Proj Cows Cow Proj Data Source: USDA-NASS, Compiled & Analysis by LMIC
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
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
U S ALL HAY PRODUCTION Crop Year Mil. Tons 170 160 150 140 130 Production 120 110 100 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Data Source: USDA-NASS, Compiled & Forecasts by LMIC G-NP-19 01/11/13
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 All Hay Alfalfa Other Hay
Mil. Pounds 550 BEEF PRODUCTION Federally Inspected, Weekly 525 500 Avg. 2007-11 475 450 425 400 375 2013 JAN APR JUL OCT Data Source: USDA-AMS & USDA-NASS M-S-18 04/08/13
Thou. Head 720 670 CATTLE SLAUGHTER Federally Inspected, Weekly Avg. 2007-11 620 570 520 2013 470 JAN APR JUL OCT Data Source: USDA-AMS & USDA-NASS C-S-08 04/05/13
STEER DRESSED WEIGHT Federally Inspected, Weekly Pounds 890 880 870 860 Avg. 2007-11 850 840 830 820 810 2013 800 JAN APR JUL OCT Data Source: USDA-AMS & USDA-NASS C-S-18 04/05/13
BEEF COW SLAUGHTER Federally Inspected, Weekly Thou. Head 85 80 75 70 65 60 Avg. 2007-11 55 50 2013 45 JAN APR JUL OCT Data Source: USDA-AMS & USDA-NASS C-S-34 04/05/13
CHOICE MINUS SELECT BEEF PRICES Carcass Cutout Value 600-900 Lbs., Weekly $ Per Cwt. 25 20 Avg. 2007-11 15 10 5 2013 0 JAN APR JUL OCT C-P-68 04/08/13 Data Source: USDA-AMS, Compiled & Analysis by LMIC
Bil. Pounds 6.9 6.7 6.5 6.3 6.1 5.9 5.7 5.5 COMMERCIAL BEEF PRODUCTION Quarterly Avg. 2007/11 2013 2014 5.3 JAN-MAR APR-JUN JUL-SEP OCT-DEC Data Source: USDA-NASS, Compiled & Analysis by LMIC M-S-01 03/29/13
$ Per Cwt. 850 800 750 700 650 600 550 500 WHOLESALE BEEF RIBEYE PRICES Boneless, Light, Weekly Avg. 2007-11 2013 450 JAN APR JUL OCT Data Source: USDA-AMS M-P-21 04/01/13
$ Per Cwt. 1300 1200 1100 1000 WHOLESALE BEEF FULL TENDER PRICES Musl-On, 5 Pounds and Up, Weekly Avg. 2007-11 900 800 2013 700 JAN APR JUL OCT Data Source: USDA-AMS M-P-23 04/01/13
$ Per Cwt. 260 WHOLESALE BEEF CHUCK PRICES Boneless 2 Piece, Weekly 240 220 200 Avg. 2007-11 180 160 2013 140 JAN APR JUL OCT Data Source: USDA-AMS 04/01/13
$ Per Cwt. 230 220 210 200 190 180 170 160 150 140 JAN WHOLESALE BEEF BOTTOM ROUND PRICES 18-33 Pounds, Weekly APR JUL OCT Avg. 2007-11 2013 Data Source: USDA-AMS M-P-22 04/01/13
$ Per Cwt. 110 100 90 80 70 60 50 WHOLESALE BONELESS BEEF PRICES Fresh, 50% Lean, Weekly Avg. 2007-11 2013 40 JAN APR JUL OCT Data Source: USDA-AMS M-P-25 04/01/13
$ Per Cwt. 250 230 210 190 WHOLESALE BONELESS BEEF PRICES Fresh, 90% Lean, Weekly Avg. 2007-11 170 150 2013 130 JAN APR JUL OCT Data Source: USDA-AMS M-P-24 04/01/13
COMMERCIAL PORK PRODUCTION Quarterly Bil. Pounds 6.6 6.4 6.2 6.0 5.8 5.6 Avg. 2007/11 2013 5.4 5.2 2014 5.0 JAN-MAR APR-JUN JUL-SEP OCT-DEC Data Source: USDA-NASS, Compiled & Analysis by LMIC M-S-06 03/29/13
WHOLESALE HAM PRICES Selected, 23-27 Pounds, Weekly $ Per Cwt. 90 85 80 Avg. 2007-11 75 70 65 60 55 2013 50 JAN APR JUL OCT M-P-27 04/01/13 Data Source: USDA-AMS
$ Per Cwt. 165 WHOLESALE PORK LOIN PRICES 1/4 Inch Trim, 21 Pounds and Down-Light, Weekly 155 145 135 125 115 Avg. 2007-11 105 95 85 2013 JAN APR JUL OCT Data Source: USDA-AMS M-P-28 04/01/13
WHOLESALE PORK BELLY PRICES Primal Cutout Value, Weekly $ Per Cwt. 160 150 140 Avg. 2007-11 130 120 110 100 90 80 2013 70 JAN APR JUL OCT M-P-29 04/01/13 Data Source: USDA-AMS
$ Per Cwt. 85 80 75 70 65 60 55 50 45 40 JAN WHOLESALE PORK TRIMMING PRICES Fresh, 72% Lean, Weekly APR JUL OCT Avg. 2007-11 2013 Data Source: USDA-AMS M-P-30 04/01/13
$ Per Cwt. 180 WHOLESALE PORK SPARERIB PRICES Vac. Packed, 3/Bag, 4.25 Pounds and Down, Weekly 170 160 Avg. 2007-11 150 140 130 120 110 2013 100 JAN APR JUL OCT Data Source: USDA-AMS M-P-31 04/01/13
RTC BROILER PRODUCTION Quarterly Bil. Pounds 9.7 9.5 9.3 9.1 8.9 Avg. 2007/11 2013 8.7 8.5 JAN-MAR APR-JUN JUL-SEP OCT-DEC 2014 Data Source: USDA-NASS, Compiled & Analysis by LMIC M-S-30 03/29/13
Cents Per Pound 160 155 150 145 140 135 130 125 120 115 110 JAN WHOLESALE CHICKEN BREAST PRICES Skinless/Boneless, Northeast, Truckload, Weekly APR JUL OCT Avg. 2007-11 2013 Data Source: USDA-AMS P-P-02 04/01/13
Cents Per Pound 85 WHOLESALE CHICKEN LEG PRICES Northeast, Truckload, Weekly 80 75 Avg. 2007-11 70 65 60 55 50 2013 45 JAN APR JUL OCT Data Source: USDA-AMS P-P-03 04/01/13
Cents Per Pound 225 WHOLESALE CHICKEN WING PRICES Northeast, Truckload, Weekly 200 175 150 Avg. 2007-11 125 2013 100 JAN APR JUL OCT Data Source: USDA-AMS P-P-07 04/01/13
U S BEEF AND VEAL EXPORTS Carcass Weight, Monthly Mil. Pounds 240 220 Avg. 2007-11 200 180 160 140 2013 120 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Data Source: USDA-ERS & USDA-FAS I-N-16 04/08/13
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 03/11/13
MAJOR U S BEEF EXPORT MARKETS Carcass Weight, Annual Mil. Pounds 700 600 500 400 Avg. 2006/10 2011 300 200 100 0 Japan Canada Mexico Korea I-N-18 03/11/13 Data Source: USDA-ERS & USDA-FAS, Compiled & Analysis by LMIC
U.S. Beef Exports Major Markets 3000 1000 lbs Carcass Wt 2500 2000 1500 1000 500 OTHER KOREA MEXICO CANADA JAPAN 0 2000 2002 2004 2006 2008 2010
U S BEEF AND VEAL IMPORTS Carcass Weight, Monthly Mil. Pounds 265 245 225 205 185 Avg. 2007-11 165 145 2013 125 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Data Source: USDA-ERS & USDA-FAS I-N-15 04/08/13
Mil. Pounds 1000 900 800 700 600 500 400 300 200 100 0 MAJOR U S BEEF IMPORT SOURCES Carcass Weight, Annual Australia New Zealand Canada Mexico Avg. 2006/10 2011 Data Source: USDA-ERS & USDA-FAS, Compiled & Analysis by LMIC I-N-36 03/11/13
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 2013 2014
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 03/11/13 Data Source: USDA-ERS & USDA-FAS, Compiled & Analysis by LMIC
Thou. Head 2000 CATTLE IMPORTS FROM CANADA AND MEXICO Annual 1500 Mexico 1000 500 Canada 0 1987 1990 1993 1996 1999 2002 2005 2008 2011 Data Source: USDA-ERS & USDA-FAS, Compiled & Analysis by LMIC I-N-13 02/11/13
U S CATTLE IMPORTS FROM CANADA Monthly Thou. Head 150 130 110 90 Avg. 2007-11 70 50 30 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 2013 Data Source: USDA-ERS & USDA-FAS I-N-04 04/08/13
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 2013 Data Source: USDA-ERS & USDA-FAS I-N-03 04/08/13
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 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 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 Data Source: USDA-NASS, Compiled & Forecasts by LMIC G-NP-07 03/28/13
Mil. Head 12.0 CATTLE ON FEED US Total, Monthly 11.5 Avg. 2007/11 11.0 10.5 10.0 2013 9.5 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC C-N-10 03/22/13 Data Source: USDA-NASS
Mil. Head 2.7 FEEDLOT PLACEMENTS US Total, Monthly 2.5 2.3 2.1 Avg. 2007/11 1.9 1.7 1.5 2013 1.3 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Data Source: USDA-NASS C-N-08 03/22/13
Mil. Head 2.2 FED CATTLE MARKETINGS US Total, Monthly 2.1 2.0 1.9 Avg. 2007/11 1.8 1.7 1.6 2013 1.5 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Data Source: USDA-NASS C-M-11 03/22/13
$ Per Cwt 150 140 130 120 110 100 CHOICE STEER PRICE vs BREAKEVEN Cattle Feeding, S. Plains, Monthly Latest Data: February 2013 Steer Price Breakeven 90 80 2005 2006 2007 2008 2009 2010 2011 2013 Projected Breakeven Data Source: USDA-AMS & USDA-NASS, Compiled & Analysis by LMIC C-P-21 03/15/13
$ 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: February 2013 2004 2005 2006 2007 2008 2009 2010 2011 2013 Data Source: USDA-AMS & USDA-NASS, Compiled & Analysis by LMIC C-P-22 03/15/13
2013 Cattle Market Expectations Cattle and beef prices pushed higher by limited supplies Beef production down by 4.5-5.0% 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, 2013 Projected
Cattle Industry Evolution 1960s-2006 Built on cheap energy and cheap grain Increasingly grain intensive Limited stocker role (more calves in feedlots) Influence on production systems Animal genetics (carcass weights) Type and use of technology Industry infrastructure (location and capacity) Cattle feeding Meat packing
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 Corn Hay Source: Nevil Speer. Based on corn at 88% and hay at 55% TDN
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. 130.00 120.00 110.00 100.00 90.00 80.00 70.00 60.00 50.00 40.00
KANSAS FEEDLOT CLOSEOUTS Feeding Costs per Cwt, Steers $/cwt 135 125 115 105 Avg. 2007/11 95 85 75 2013 65 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Data Source: KSU Focus on Feedlots, Compiled by LMIC 04/01/13
Corn Price and Estimated Feedlot Cost of Gain Based on Kansas Feedlot Data Corn Price $/Bu Estimated Feedlot Cost of Gain $/cwt. 5.00 87.1 5.50 92.5 6.00 97.8 6.25 100.3 6.50 102.9 6.75 105.4 7.00 107.8 7.25 110.3 7.50 112.7 7.75 115.0 8.00 117.4 8.25 119.7 8.50 122.0
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
Future Forage Use in the U.S. 1) Use more forage 2) Use forage more efficiently 3) Manage forage more efficiently 4) Use different forages 5) Use forages differently
The Industry Faces New Questions For the last 4-5 decades: How can we get cattle to use more grain? For the coming decades: How can we produce high quality beef using the least amount of grain? Expanded forage role
$ 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 03/12/13
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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