Cattle-Beef and General Market Outlook

Cattle-Beef and General Market Outlook Stephen R. Koontz Professor & extension economist Department of Agricultural & Resource Economics Colorado Stat...
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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: