Beef Cattle Outlook

Dr. Curt Lacy Extension Economist-Livestock

UGA Winter School Beef Update January 20, 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

JAN

APR

JUL

OCT

$ Per Cwt.

Avg.2005-09

2010

2011

12/19/11Livestock Marketing Information Center

Data Source: USDA-AMS, Compiled & Analysis by LMIC

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

70

80

90

100

110

120

130

JAN

APR

JUL

OCT

$ Per Cwt.

Avg.2005-09

2010

2011

12/19/11Livestock Marketing Information Center

Data Source: USDA-AMS, Compiled & Analysis by LMIC

SLAUGHTER STEER PRICES5 Market Weighted Average, Weekly

80

85

90

95

100

105

110

115

120

125

130

JAN APR JUL OCT

$ Per Cwt.

Avg.2005-09

2010

2011

Livestock Marketing Information Center

Data 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.2005-09

2010

2011

C-P-62

01/03/12Livestock Marketing Information Center

Data Source: USDA-AMS

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

0

2

4

6

8

10

12

14

16

18

20

JAN APR JUL OCT

$ Per Cwt.

Avg.2005-09

2010

2011

C-P-68

01/03/12Livestock Marketing Information Center

Data Source: USDA-AMS, Compiled & Analysis by LMIC

5 THINGS SHAPING MARKETS TODAY AND FOR 2012

BEEF COW SLAUGHTERFederally Inspected, Weekly

45

50

55

60

65

70

75

80

85

90

95

JAN

APR

JUL

OCT

Thou. Head

Avg.2005-09

2010

2011

C-S-34

12/30/11Livestock Marketing Information Center

Data Source: USDA-AMS & USDA-NASS

Source: DTN/Telvent

TOTAL U.S. EXPORTS

OF BEEF MUSCLE CUTSWeekly

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 Center

Data Source: USDA-FAS

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

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

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-18B

07/22/11

-0.5 Percent

2011 = 35.5 Million Head

Livestock Marketing Information Center

Data Source: USDA-NASS

CHANGE IN BEEF COW NUMBERS

JANUARY 1, 2010 TO JANUARY 1, 2011 (1000 Head)

2 to 44 (13)

0 to 2 (7)

-10 to 0 (17)

-115 to -10 (13)

Alaska

Hawaii

US Total

C-N-28

01/28/11

-10

-0

-28 -9

-10

13

CT -2

DE -1

-32

-20

-2

6

-37 -8

-45

44 -47

-38

2

MD 1

MA -2

3

-20

-8

-103

11

-90

-1

NJ -1

-14

0

-16

11

2

3

-3

RI 0

1

-8

-7

-115

-3

0

10

6

10

5

0

-506

Livestock Marketing Information Center

Data Source: USDA/NASS

-37

C-N-02

01/29/10

Declining cow numbers reflect lack of profitability in the

sector

25

30

35

40

45

50

1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010

Mil. Head

JANUARY 1 “BEEF COW FACTORY’

U.S., Annual

ReplacementHeifers

Beef Cows

Beef cows down 2 percent @ 30.9 million Beef replacement heifers down 5 percent @ 5.20 million Total beef cow factory down 2.1percent

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

Source: USDA-WASDE, December 2011 Report

2010

2011

Projected

2012

Forecast 11 vs 10 12 vs 11

Beef 26.30 26.39 25.07 0.34% -5.27%

Pork 22.44 22.67 23.07 1.01% 1.73%

Total Red Meat* 49.04 49.36 48.44 0.65% -1.90%

Broilers 36.91 36.92 36.31 0.03% -1.68%

Total Poultry** 43.06 43.18 42.59 0.28% -1.39%

Total RedMeat & Poultry 92.10 92.54 91.02 0.48% -1.67%

BILLION POUNDS PERCENT CHANGECommodity

Tight Stocks Since 1995 in Feed Crops Despite Large Crops

19.8% 17.5%

11.6% 12.8% 13.9% 13.1%

5.4% 6.7%

0%

10%

20%

30%

40%

50%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12

Ending Stocks Production Domestic Use and Exports Stocks:Use

US Corn Supply and Demand

Projected Prices 2011 and Beyond

$40

$50

$60

$70

$80

$90

$100

$110

$120

$130

$140

2010 2011 2012 2013

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

Source: USDA, LMIC and UGA

INPUTS, PROFITS AND RISK MANAGEMENT FOR 2012

90

95

100

105

110

115

-100

-50

0

50

100

150

1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Mil. Head $ Per Cow

COW-CALF RETURNS AND CATTLE INVENTORY

U.S., Annual

Cow-CalfReturns

CattleInventoryJan 1

C-P-67

11/17/11

Livestock Marketing Information Center

Data Source: USDA-AMS & USDA-NASS, Compiled & Analysis by LMIC

Don’t look for fertilizer prices to go down

$-

$200.00

$400.00

$600.00

$800.00

$1,000.00

$1,200.00

$1,400.00

Dat

e

4/7

/20

08

5/1

9/2

00

9

6/3

0/2

00

8

8/1

1/2

00

8

9/2

9/2

00

8

11

/10

/20

08

12

/22

/20

08

2/9

/20

09

3/2

3/2

00

9

5/1

1/2

00

9

6/2

9/2

00

9

8/1

0/2

00

9

9/2

8/2

00

9

11

/9/2

00

9

12

/21

/20

09

2/1

/20

10

3/1

5/2

01

0

4/2

6/2

01

0

6/2

1/2

01

0

8/9

/20

10

9/2

0/2

01

0

11

/1/2

01

0

12

/13

/20

10

1/2

4/2

01

1

3/7

/20

11

4/1

8/2

01

1

5/3

0/2

01

1

7/1

1/2

01

1

8/2

2/2

01

1

10

/3/2

01

1

11

/14

/20

11

12

/26

/20

11

$/t

on

Fertilizer Prices 2002-2011

Ammonium Nitrate

DAP (Diammonnm Phospate)

Potash

Feedstuffs will be higher also

$-

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

$10.00

$-

$100.00

$200.00

$300.00

$400.00

$500.00

$600.00

$700.00

3/3/2008 3/3/2009 3/3/2010 3/3/2011

Do

llars

Pe

r To

n

Weekly Average Feed Prices

Whole Cottonseed

Corn Gluten Pellets

Soybean Hull Pellets

2 Yellow Corn

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

$75.00

$85.00

$95.00

$105.00

$115.00

$125.00

$135.00

$145.00

$155.00

$165.00

2012

Co

st o

f P

rod

uct

ion

($

/Cw

t.)

Expected Production Costs in 2012

Variable Costs Fixed Costs

Range of Expected Prices

There are opportunities to manage risk

$80.00

$90.00

$100.00

$110.00

$120.00

$130.00

$140.00

$150.00

$160.00

$170.00

Feb

-12

Mar

-12

Ap

r-1

2

May

-12

Jun

-12

Jul-

12

Au

g-1

2

Sep

-12

Oct

-12

No

v-1

2

Dec

-12

$/C

wt.

CME Feeder Cattle Futures Month

CME Live and Feeder Cattle Futures Close for January 6, 2012

Feeder Cattle Futures

Live Cattle Futures

Beef Cattle Outlook

R. Curt Lacy, Ph.D.

Extension Economist-Livestock

www.secattleadvisor.com