Cattle-Beef and General Market Outlook Stephen R. Koontz Professor & extension economist Department of Agricultural & Resource Economics Colorado State University
[email protected] http://webdoc.agsci.colostate.edu/koontz Colorado Farm show – Greeley, Colorado January, 2015
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The Economy Is • • • • •
Consumer Spending (C) Business Investment (I) Government Spending & Investment (G) Net Exports or Exports less Imports (X ‐ M) Total Economic Output (Y) – Is Y = C + I + G + (X ‐ M)
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1/26/2015 Clear picture of future Fed actions on interest rates. Last year, it said we would be at 0.50% by now. Federal funds rate: Zero now. 50:50 will be 0.25% Jun 2015. Will be 0.25% by Aug 2015. Will be 0.5% by Jan 2016.
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Weekly S&P 500 Index Contract
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Economic Outlook Summary • Consumer Spending – solid & improving income. • Business Investment – last category to improve. • Government Spending & Investment – reductions in all categories. • Net Exports – okay… • Fewer domestic concerns & more international – exception is energy…
Weekly Live Cattle Contract $170 This market has found a top – trading range of $135-172/cwt.
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Weekly Feeder Cattle Contract $240 This market has found a top – trading range of $???-242/cwt.
Cattle Outlook • Fed cattle market has been strong: – Domestic demand is the reason. – International demand and trade less so… – Competing meats…?
• Feeder cattle and calf prices were as good as they are going to get during fall 2014: – Modest continued beef cow liquidation. – But evidence of herd rebuilding.
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Net Present Values of Bred Heifers
RETAIL ALL FRESH BEEF DEMAND INDEX Annual, Using CPI 1990=100
Index Value 120 100
100
96
91
86 86
80
91 82 79
85 83 80 81 77 75 75
88 85 85
80
81 77 75 77 79
60 40 20 0 1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Data Source: Bureau of Labor Statistics, USDA‐ERS, Compiled & Analysis by LMIC Livestock Marketing Information Center
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RETAIL ALL FRESH BEEF DEMAND INDEX Fourth Quarter, Using CPI 1990=100
Index Value 120 100
100
94
88 87 85
80
85 87 83 81 80 76 74 76 79
93
87 88 89
82
83 83
75 78 78
60 40 20 0 1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Data Source: Bureau of Labor Statistics, USDA‐ERS, Compiled & Analysis by LMIC Livestock Marketing Information Center
Index Value 120 100
100
RETAIL ALL FRESH BEEF DEMAND INDEX First Quarter, Using CPI 1990=100
95 94 86 87 83 86
80
91 75 77 76
80 80 83 83
87 85 85 82 81
80 80 80 74 77
60 40 20 0 1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
Data Source: Bureau of Labor Statistics, USDA‐ERS, Compiled & Analysis by LMIC Livestock Marketing Information Center
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Index Value 120 100
100
96
90
80
RETAIL ALL FRESH BEEF DEMAND INDEX Second Quarter, Using CPI 1990=100
83 84 80 80
75 73
86 83 77 77 79
91 90
84 84
80 76 78 80 74 75
84
60 40 20 0 1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
Data Source: Bureau of Labor Statistics, USDA‐ERS, Compiled & Analysis by LMIC Livestock Marketing Information Center
Index Value 120 100
RETAIL ALL FRESH BEEF DEMAND INDEX Third Quarter, Using CPI 1990=100
100 99 91 89 86 84
80
75 73 75 77
82 82 83 85
92
87
83 83
87 78
78 79 74 75 76
60 40 20 0 1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
Data Source: Bureau of Labor Statistics, USDA‐ERS, Compiled & Analysis by LMIC Livestock Marketing Information Center
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Cents Per Pound 950
WHOLESALE BEEF RIBEYE PRICES Boneless, Light, Weekly
900 850 800 750 700 650 600 550 500 450 JAN
APR
JUL
Avg. 2009‐13
OCT
2014
2015
Data Source: USDA‐AMS
M-P-21 01/20/15
Livestock Marketing Information Center
Cents Per Pound 750
WHOLESALE BEEF LOIN STRIP PRICES Boneless 0x1, Weekly
700 650 600 550 500 450 400 350 JAN
APR
JUL
Avg. 2009‐13 Data Source: USDA‐AMS
OCT
2014
2015 01/20/15
Livestock Marketing Information Center
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Cents Per Pound 340
WHOLESALE BEEF CHUCK PRICES Boneless 2 Piece, Weekly
320 300 280 260 240 220 200 180 160 140 JAN
APR
JUL
Avg. 2009‐13
OCT
2014
2015
Data Source: USDA‐AMS
01/20/15
Livestock Marketing Information Center
WHOLESALE BEEF BOTTOM ROUND PRICES 18‐33 Pounds, Weekly
Cents Per Pound 320 300 280 260 240 220 200 180 160 140 JAN
APR
JUL
Avg. 2009‐13 Data Source: USDA‐AMS Livestock Marketing Information Center
OCT
2014
2015 M-P-22 01/20/15
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Cents Per Pound 320
WHOLESALE BONELESS BEEF PRICES Fresh, 90% Lean, Weekly
300 280 260 240 220 200 180 160 140 JAN
APR
JUL
Avg. 2009‐13
OCT
2014
2015
Data Source: USDA‐AMS
M-P-24 01/20/15
Livestock Marketing Information Center
Cents Per Pound 185
WHOLESALE PORK LOIN PRICES ¼ Inch Trim, Vacuum Sealed, Weekly
175 165 155 145 135 125 115 105 95 85 JAN
APR
JUL
Avg. 2009‐13 Data Source: USDA‐AMS Livestock Marketing Information Center
OCT
2014
2015 M-P-28 01/20/15
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Cattle & Beef Going Forward? • Strength of domestic & international demand are the cause of strong & weak cattle prices. • Multiple years of drought impacting supplies & market dynamics. • Now is the result of herd expansion & return to more normal feeding costs. • Will be pressured by pork & poultry prices – beef will lose market share. • Tough times for single species margin operations. • As good as it gets for cow‐calf operations.
US EXPORTS OF BEEF MUSCLE CUTS Weekly
1000 MT 6 5 4 3 2 1 0 Jan‐09
Jan‐10
Jan‐11
Canada
Jan‐12
Japan
Mexico
Jan‐13
Jan‐14
Korean Rep.
Data Source: USDA‐AMS & USDA‐APHIS Livestock Marketing Information Center
01/09/15
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TOTAL U.S. EXPORTS OF BEEF MUSCLE CUTS Weekly
1000 MT 25
20
15
10
5 Jan‐11
Jul‐11
Jan‐12
Jul‐12
Jan‐13
Jul‐13
Jan‐14
Jul‐14
Data Source: USDA‐FAS 01/09/15
Livestock Marketing Information Center
1000 MT 30
TOTAL US EXPORTS OF PORK MUSCLE CUTS Weekly
25
20
15
10
5 Mar‐13
Sep‐13
Mar‐14
Sep‐14
Data Source: USDA‐FAS Livestock Marketing Information Center
01/09/15
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$ Per Cwt. 280
BOXED BEEF CUTOUT VALUE Choice 600‐900 Lbs., Carcass, Weekly
260 240 220 200 180 160 140 JAN
APR
JUL
Avg. 2009‐13
OCT
2014
2015
Data Source: USDA‐AMS
C-P-62 01/20/15
Livestock Marketing Information Center
$ Per Cwt. 185
SLAUGHTER STEER PRICES 5 Market Weighted Average, Weekly
175 165 155 145 135 125 115 105 95 85 JAN
APR
JUL
Avg. 2009‐13 Data Source: USDA‐AMS
OCT
2014
2015 01/20/15
Livestock Marketing Information Center
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$ Per Cwt. 260
MED. & LRG. #1 FEEDER STEER PRICES 700‐800 Pounds, Southern Plains, Weekly
240 220 200 180 160 140 120 100 JAN
APR
JUL
Avg. 2009‐13
OCT
2014
2015
Data Source: USDA‐AMS, Compiled and Analysis by LMIC
C-P-49 01/20/15
Livestock Marketing Information Center
$ Per Cwt. 370
MED. & LRG. #1 STEER CALF PRICES 400‐500 Pounds, Southern Plains, Weekly
320 270 220 170 120 JAN
APR
JUL
Avg. 2009‐13 Data Source: USDA‐AMS, Compiled & Analysis by LMIC Livestock Marketing Information Center
OCT
2014
2015 C-P-49A 01/20/15
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SLAUGHTER COW PRICES Southern Plains, 85‐90% Lean, Weekly
$ Per Cwt. 145 135 125 115 105 95 85 75 65 55 45 JAN
APR
JUL
Avg. 2009‐13
2014
OCT
2015
Data Source: USDA‐AMS
C-P-35 01/20/15
Livestock Marketing Information Center
Pounds 1350
LIVE WEIGHT – STEER AND HEIFER Texas/Oklahoma Panhandle Area, Weekly
1330 1310 1290 1270 1250 1230 1210 JAN
APR
JUL
Avg. 2008‐12 Data Source: USDA-AMS & USDA-NASS Livestock Marketing Information Center
OCT
2013
2014 C-S-26 01/09/15
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BEEF COW SLAUGHTER Federally Inspected, Weekly
Thou. Head 90 80 70 60 50 40 30 JAN
APR
JUL
Avg. 2008‐12
OCT
2013
2014
Data Source: USDA-AMS & USDA-NASS
C-S-34 01/09/15
Livestock Marketing Information Center
DAIRY COW SLAUGHTER Federally Inspected, Weekly
Thou. Head 75 70 65 60 55 50 45 40 JAN
APR
JUL
Avg. 2008‐12 Data Source: USDA-AMS & USDA-NASS Livestock Marketing Information Center
OCT
2013
2014 C-S-35 01/09/15
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JANUARY 1 TOTAL COW INVENTORY U.S., Annual
Mil. Head 50 48 46 44 42 40 38 36 1984
1987
1990
1993
1996
1999
2002
2005
2008
2011
2014
2017
C-N-02A 09/05/14
Data Source: USDA-NASS Livestock Marketing Information Center
PERCENT CHANGE IN CATTLE INVENTORY U.S., January 1 3 2 1 0 ‐1 ‐2 ‐3 ‐4 1984
1987
1990
1993
1996
Data Source: USDA-NASS, Analysis by LMIC Livestock Marketing Information Center
1999
2002
2005
2008
2011
2014
C-N-48 09/05/14
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CALF CROP July Estimates, U.S., Annual
Mil. Head 43 42 41
2014 = 33.6 Million Head -1 Percent
40 39 38 37 36 35 34 33 1984
1987
1990
1993
1996
1999
2002
2005
2008
2014
C-N-18B 09/05/14
Data Source: USDA-NASS Livestock Marketing Information Center
Mil. Head 7.0
2011
HEIFERS HELD AS BEEF COW REPLACEMENTS January 1, U.S.
6.5
6.0 +0.8 %
5.5
5.0
4.5 1984
1987
1990
1993
Data Source: USDA-NASS Livestock Marketing Information Center
1996
1999
2002
2005
2008
2011
2014
C-N-38 09/05/14
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ESTIMATED AVERAGE COW CALF RETURNS Returns Over Cash Cost (Includes Pasture Rent), Annual
$ Per Cow 500 400 300 200 100 0 ‐100 1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
Data Source: USDA‐AMS, Compiled and Analysis by LMIC
2012
2014
C-P-66 12/19/14
Livestock Marketing Information Center
CATTLE ON FEED US Total, Monthly
Mil. Head 12 11.5 11 10.5 10 9.5 JAN
FEB
MAR
APR
MAY
JUN
Avg. 2009/13 Data Source: USDA‐NASS Livestock Marketing Information Center
JUL
2014
AUG
SEP
OCT
NOV
DEC
2015 C-N-10 01/23/15
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FEEDLOT PLACEMENTS US Total, Monthly
Mil. Head 2.5 2.3 2.1 1.9 1.7 1.5 1.3 JAN
FEB
MAR
APR
MAY
JUN
Avg. 2008/12
JUL
AUG
2013
SEP
OCT
NOV
DEC
2014
Data Source: USDA‐NASS
C-N-08 01/23/15
Livestock Marketing Information Center
FED CATTLE MARKETINGS US Total, Monthly
Mil. Head 2.1 2.0 1.9 1.8 1.7 1.6 1.5 JAN
FEB
MAR
APR
MAY
JUN
Avg. 2008/12 Data Source: USDA‐NASS Livestock Marketing Information Center
JUL
2013
AUG
SEP
OCT
NOV
DEC
2014 C-M-11 01/23/15
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CATTLE ON FEED OVER 120 DAYS US Total, Monthly
Mil. Head 5 4.5 4 3.5 3 2.5 JAN
FEB
MAR
APR
MAY
JUN
Avg. 2009/13 Data Source: USDA‐NASS, Compiled & Analysis by LMIC Livestock Marketing Information Center
JUL
2014
AUG
SEP
OCT
NOV
DEC
2015 C-N-12 01/23/15
DEC 2014 Live Cattle Contract
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JUN 2015 Live Cattle Contract
NOV 2014 Feeder Cattle Contract
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MAY 2015 Feeder Cattle Contract
Cattle Outlook • 2012 & 2013: Soft demand & heavy showlists. • Late 2013 & 2014: Clear signs of improving & wow! • Liquidation & rebuilding. • Reasonable feed costs. • Worst case scenario – softening demand & strong competing meat production. • Best case scenario – fall 2014…
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Weekly Corn Contract $8.00
$5.00
The trading range for corn is $3.00-$4.50/bu. Except…
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DEC 2015 Corn Contract
Forecast $4.00-4.50/bu…
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US ALL HAY SUPPLY & DISAPPEARANCE Crop Year
Mil. Tons 190 180 170 160 150 140 130 120 110 1990
1992
1994
1996
1998
2000
2002
Hay Supply
2004
2006
2008
2010
2012
2014
Disap.
Data Source: USDA‐NASS, Compiled & Forecasts by LMIC
G-NP-20 01/16/15
Livestock Marketing Information Center
US ALL HAY STOCKS December 1
Mil. Tons 120
110
100
90
80
70 1989
1991
1993
1995
1997
Data Source: USDA‐NASS, Compiled & Forecasts by LMIC Livestock Marketing Information Center
1999
2001
2003
2005
2007
2009
2011
2013
G-NP-22 01/16/15
41
US ALL HAY STOCKS May 1 (Beginning of Crop Year)
Mil. Tons 30
25
20
15
10
5 1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
Data Source: USDA‐NASS, Compiled & Forecasts by LMIC Livestock Marketing Information Center
2012
2014
G-NP-21 01/16/15
Forage Outlook
• Hay price followed corn. Anticipated weaker hay prices this year but… • • • • •
North v. South... East v. West... Beef v. Dairy… High‐priced excellent hay: >$150‐$175/T. Low‐priced low‐quality hay: