Beef Cattle Outlook

Dr. Curt LacyExtension Economist-Livestock

University of Georgia Florida Cattlemen’s Institute

January 26, 2012

Overview

• Recent Trends• Outlook for 2012 and beyond• Marketing Alternatives

MED. & LRG. #1 & 2 STEER CALF PRICES500-600 Pounds, Georgia, Weekly

90

100

110

120

130

140

150$ Per Cwt.

Avg.2006-010

2011

2012

01/18/12Livestock Marketing Information CenterData Source: USDA-AMS, Compiled & Analysis by LMIC

2010

MED. & LRG. #1 & 2 FEEDER STEER PRICES700-800 Pounds, Georgia, Weekly

70

80

90

100

110

120

130$ Per Cwt.

Avg.2006-010

2011

2012

01/18/12Livestock Marketing Information CenterData Source: USDA-AMS, Compiled & Analysis by LMIC

SLAUGHTER STEER PRICES5 Market Weighted Average, Weekly

8085

9095

100105

110115120

125130

JAN APR JUL OCT

$ Per Cwt.

Avg.2006-10

2011

2012

Livestock Marketing Information CenterData Source: USDA-AMS

BOXED BEEF CUTOUT VALUEChoice 600-900 Lbs. Carcass, Weekly

135

145

155

165

175

185

195

205

JAN APR JUL OCT

$ Per Cwt.

Avg.2006-10

2011

2012

C-P-6201/23/12

Livestock Marketing Information CenterData Source: USDA-AMS

CHOICE MINUS SELECT BEEF PRICESCarcass Cutout Value 600-900 Lbs., Weekly

02

468

10

121416

1820

JAN APR JUL OCT

$ Per Cwt.

Avg.2006-10

2011

2012

C-P-6801/23/12

Livestock Marketing Information CenterData Source: USDA-AMS, Compiled & Analysis by LMIC

5 THINGS SHAPING MARKETS TODAY AND FOR 2012

BEEF COW SLAUGHTERFederally Inspected, Weekly

4550556065707580859095Thou. Head

Avg.2006-10

2011

2012

C-S-3401/20/12Livestock Marketing Information Center

Data Source: USDA-AMS & USDA-NASS

2011 Beef Cow Slaughter Ca. 3.8 million

U S BEEF COW INVENTORYvs FI BEEF COW SLAUGHTER

Annual

30

31

32

33

34

35

36

1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Mil. Head

2.4

2.7

3.0

3.3

3.6

3.9

4.2Mil. Head

Beef CowInventory

FI BeefCowSlaughter

C-S-2801/28/11Livestock Marketing Information Center

Data Source: USDA-NASS

U S BEEF COW INVENTORY CHANGEvs FI BEEF COW SLAUGHTER

As a Percent of Total Cow Inventory, Annual

-2

-1.5

-1

-0.5

0

0.5

1

1.5

1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Mil. Head

6.5

7.5

8.5

9.5

10.5

11.5

12.5

13.5Percent

Beef CowInventoryChange

Slaughteras % ofInventory

C-S-28A01/28/11

Livestock Marketing Information CenterData Source: USDA-NASS

Source: DTN/Telvent

TOTAL U.S. EXPORTS OF BEEF MUSCLE CUTS

Weekly

4

6

8

10

12

14

16

18

20

22

Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11

1000 MT

12/29/11Livestock Marketing Information CenterData Source: USDA-FAS

OUTLOOK FOR 2012 AND BEYONDWhat can we expect this year and next?

BEEF COWS THAT HAVE CALVEDJANUARY 1, 2011

(1000 Head)

880 to 5,030 (12)450 to 880 (11)160 to 450 (13)

0 to 160 (14)

C-N-1501/28/11

659Alaska

Hawaii

US Total

5.1

180 928

600727

CT 4

DE 3.5

926

502

79

446

352213

840

1478 1023

461

13

MD 42

MA 699

360

495

1865

1476

1772237

NJ 9

488

90

351

880

290

2036

549

157RI 1.5

184

1610

990

5025

333

VT 10

675

233

200

265

694

30865

Livestock Marketing Information CenterData Source: USDA/NASS

NH 3

CALF CROPJuly 1 Estimates, U.S., Annual

35

37

39

41

43

45

1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011

Mil. Head

C-N-18B07/22/11

-0.5 Percent2011 = 35.5 Million Head

Livestock Marketing Information CenterData Source: USDA-NASS

Meat supplies were slightly larger in 2011 but will be lower in 2012

Source: USDA-WASDE, January 2012 Report

20102011

Projected2012

Forecast 11 vs 10 12 vs 11

Beef 26.41 26.30 25.08 -0.42% -4.86%Pork 22.46 22.78 23.21 1.40% 1.85%Total Red Meat* 49.18 49.37 48.58 0.38% -1.63%Broilers 36.52 36.84 36.11 0.87% -2.02%Total Poultry** 42.59 43.09 42.39 1.16% -1.65%Total RedMeat & Poultry 91.77 92.46 90.97 0.75% -1.64%

BILLION POUNDS PERCENT CHANGECommodity

Tight Stocks Since 1995 in Feed Crops Despite Large Crops

04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/120

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

0%

10%

20%

30%

40%

50%

19.8%17.5%

11.6% 12.8% 13.9% 13.1%

5.4% 6.7%

Ending Stocks Production Domestic Use and Exports Stocks:Use

US Corn Supply and Demand

Economic (Demand)Outlook

• Positives– Low interest rates– Little inflation pressure– Generally strong

corporate balance sheets– Recently improving

hiring prospects

• Negatives– Uncertainty over

European situation– Federal debt/deficit– Political uncertainty

Projected Prices 2011 and Beyond

2010 2011 2012 2013$40$50$60$70$80$90

$100$110$120$130$140

GA 500# steer GA 750# steer Choice fed steer GA Slaughter cow

Source: USDA, LMIC and UGA

INPUTS, PROFITS AND RISK MANAGEMENT FOR 2012

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

2012

-100

-50

0

50

100

150

90000

95000

100000

105000

110000

115000

COW-CALF RETURNS AND CATTLE INVENTORY

U.S., Annual

Cow-Calf Returns

Cattle In-ventory Jan 1

$ Per Cow Mil. Head

C-P-6711/17/11

Livestock Marketing Information CenterData Source: USDA-AMS & USDA-NASS, Compiled & Analysis by LMIC

Don’t look for fertilizer prices to go down

Date 7/28/2008 1/12/2009 6/29/2009 12/7/2009 5/10/2010 11/1/2010 4/4/2011 9/5/2011 $-

$200.00

$400.00

$600.00

$800.00

$1,000.00

$1,200.00

$1,400.00

Fertilizer Prices 2002-2011

Ammonium NitrateDAP (Diammonnm Phospate)Potash

$/to

n

Feedstuffs will be higher also

3/3/2

008

5/6/2

008

7/9/2

008

9/11/2

008

11/14/2

008

1/17/2

009

3/22/2

009

5/25/2

009

7/28/2

009

9/30/2

009

12/3/2

009

2/5/2

010

4/10/2

010

6/13/2

010

8/16/2

010

10/19/2

010

12/22/2010

2/24/2

011

4/29/2

011

7/2/2

011

9/4/2

011

11/7/2

011 $-

$100.00

$200.00

$300.00

$400.00

$500.00

$600.00

$700.00

$-

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

$10.00

Weekly Average Feed Prices

Whole Cottonseed

Corn Gluten Pellets

Soybean Hull Pellets

2 Yellow Corn

Dolla

rs P

er T

on

Cost of production will be higher but should be manageable for most

2012$75.00

$85.00

$95.00

$105.00

$115.00

$125.00

$135.00

$145.00

$155.00

$165.00

Variable Costs Fixed Costs

Expected Production Costs in 2012

Cost

of P

rodu

ction

($/C

wt.) Range of Expected Prices

There are opportunities to manage risk

Feb-12

Mar-12

Apr-12

May-12

Jun-12Jul-1

2

Aug-12

Sep-12

Oct-12

Nov-12

Dec-12

$80.00 $90.00

$100.00 $110.00 $120.00 $130.00 $140.00 $150.00 $160.00

CME Live and Feeder Cattle Futures Close for January 25, 2012

Feeder Cattle FuturesLive Cattle Futures

CME Feeder Cattle Futures Month

$/Cw

t.

Beef Cattle Outlook Summary

Fewer cows = less beef-less competing meats+slowly improving economyHigher Prices in 2011

Beef Cattle Outlook

R. Curt Lacy, Ph.D.Extension Economist-Livestock

www.secattleadvisor.com

Can we produce enough beef?

19201923

19261929

19321935

19381941

19441947

19501953

19561959

19621965

19681971

19741977

19801983

19861989

19921995

19982001

20042007

2010 -

5,000,000.00

10,000,000.00

15,000,000.00

20,000,000.00

25,000,000.00

30,000,000.00

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

Beef Cows vs. Beef Production USA, 1920-2011

Prod (mil) Beef Cows

Poun

ds o

f Bee

f Pro

ducti

on