2003-04 Cattle Outlookand Market Economics

Presented by

John D. Lawrence

and Gary May

Iowa State University

Factor Shaping Markets

• Short supply

• Feedlots current

• Excellent demand

• Canadian border

• Japanese tariffs and demands

Choice Boxed Beef and Nebraska Carcass Price

$95

$105

$115

$125

$135

$145

1/5/

02

3/5/

02

5/5/

02

7/5/

02

9/5/

02

11/5

/02

1/5/

03

3/5/

03

5/5/

03

7/5/

03

Choice BB Nebraska Carcass

Choice - Select Spread Heavy Carcasses

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52

2002 1997-2001 2003

Estimated Returns to Feeding Yearlings in Iowa1991- 2003

-200

-150

-100

-50

0

50

100

150

200JA

N 9

1

JAN

92

JAN

93

JAN

94

JAN

95

Jan

-96

Jan

-97

Jan

-98

Jan

-99

Jan

-00

Jan

-01

Jan

-02

Jan

-03

$/H

ead

Yearling Breakeven and Choice Price

$60

$65

$70

$75

$80

$851/

6/0

1

4/6

/01

7/6

/01

10/6

/01

1/6/

02

4/6

/02

7/6/

02

10/6

/02

1/6

/03

4/6/

03

7/6/

03

10/6

/03

Breakeven Sell Price

Total Meat Production2002 6/30/03

Red meat production +3.3% -.4%Beef +3.8% -.1%Pork +2.8% +.5%

Poultry production +3.1% -.4%Combined RM&P +3.2% -.4%

Per Capita ConsumptionRetail Weight Basis

Pounds % ChgRed meat production 58.9 -1.07

Beef 33.0 -1.90Pork 25.0 +.20

Poultry production 48.3 -.17Combined RM&P 107.2 -.51

Strong Domestic DemandQuarterly Beef Demand Index, 1997=100

85

90

95

100

105

110

115

120

Q974Q982

Q984Q992

Q994Q002

Q004Q012

Q014Q022

Q024Q032

Source: Dr. Wayne Purcell, Research Institute of Livestock Pricing

US Beef Demand Index, 1997=100

0

20

40

60

80

100

120

140

160

180

200

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

Source: Dr. Wayne Purcell, Research Institute of Livestock Pricing

Export Beef Demand• 2002 v. 2001

– Exports +7.8%

– Imports +1.7%

• Jan-May 2003 v. 2001– Exports +3.5%

– Imports -0.6%

Value of Beef, Veal, Variety Meats, and Hides Exported (Billion $)

$0

$1

$2

$3

$4

$5

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Beef&Veal Variety Meats Whole Hides

Importers, 2002

URUGUAY0%

MEXICO1%OTHER

0%

Cent America2%ARGENT

3%BRAZIL

6%

CANADA34%

AUSTRALIA35%

ZEALAND19%

Live Cattle Imports to US (Million Head)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1994 1995 1996 1997 1998 1999 2000 2001 2002

Mexico Canada 700+ Canada 440-700

Feeder Cattle Imports

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52

2002 CAN 2003CAN 2002 MEX 2003 MEX

Percentage Change in Cattle Slaughter

’02v’01 ’03v’02*

Steers +2.4 +1.2Heifers -0.5 -0.1All Cows -0.5 +7.5Dairy Cows +0.7 +12.1Other Cows -1.5 +3.6Total +0.9 +1.7

*Through end of July

Steer Carcass Weight

750760770780790800810820830840850

1/4

2/1

3/1

3/29

4/26

5/24

6/21

7/19

8/16

9/13

10/1

111

/812

/6

20022003

Average 13.5# less

Percent Changes Dressed W eight and Cattle Prices from Year Before

-20%

-10%

0%

10%

20%

30%

1/5/01 7/5/01 1/5/02 7/5/02 1/5/03 7/5/03

-4%

-2%

0%

2%

4%

6%

NE Dressed Steer Price Average Carcass W eight

Price W eight

US Net Placements

-

500

1,000

1,500

2,000

2,500

3,000

Jan

Feb Mar

AprM

ay Jun

Jul

AugSep Oct

NovDec

1,00

0 H

ead

98-02 Ave 2002 2003

US Feedlot Marketings

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

Jan

Feb Mar Apr

May Ju

nJu

lAug

Sep Oct

Nov

Avg 98-02 2002 2003

US Cattle on Feed Inventory

9,000

9,500

10,000

10,500

11,000

11,500

12,000

Jan

Feb Mar

AprM

ay Jun

Jul

AugSep Oct

NovDec

1,00

0 H

ead

98-02 Ave 2002 2003

Choice Live Steer Price Forecast

Futures AAEA USDAQ303 75.10 74.59 72-74Q403 76.35 76.27 73-792003 76.75 75-77Q104 75.31 78.38 74-80Q204 72.84 79.74 78-842004 78.03 77-83

Cattle inventories in Alberta, Canada, and the US

  Alberta Canada US 

1000 HeadTotal Cattle & Calves 5,220 13,372 96,106Cows & Heifers 1,937 5,691 42,099Beef Cows 1,845 4,616 32,947Milk Cows 92 1,075 9,152 

1 year & over Over 500#Heifers 771 1,925 19,601Steers 678 1,135 16,590Bulls 94 237 2,253Calves 1,740 4,383 15,563

Canadian Beef Imported to the US

   % of US Consumption

  Million As As Total

Pounds Beef Cattle %

2000 918 3.4 2.7 6.1

2001 987 3.7 3.6 7.2

2002 1090 3.9 4.3 8.2

Live Cattle Imports from Canada  Feeder Slghtr Slghtr Total

Cattle Str&Hfr Cows Cattle2000 79,367 84,420 645,485 971,0332001 157,837 832,744 185,426 1,270,1852002 457,685 754,108 259,509 1,610,232Jan-Apr 03 87,884 248,171 85,768 447,734

Cows as a percent of imported cattle from Canada200066.5%200114.5%200216.1%Jan-Apr 03 19.2%

Canadian Market

May 17 June 28 July 26

Wkly Slght 69,456 46,20859,576

Car Wt 785 815 833

Low Price 104.80 35.00 29.35

High Price 109.90 51.55 39.50

Live Cattle Futures Before and after May 20 BSE Announcement

Contract May 12-16 High 6/2 Low 6/19 July 10

MAY 76.87 82.00

JUN 73.95 76.83 71.67

JUL 70.29 72.45 68.87 72.35

AUG 69.42 71.25 67.12 71.15

OCT 70.53 71.60 68.45 72.45

DEC 73.31 74.85 71.85 74.30

FEB 74.69 75.65 73.65 75.28

APR 75.68 76.75 74.25 75.25

Re-opening Canadian Border

• Don’t know when, but watch Sept 1– Japan deadline

• Japan hold up– Develop COOL for Japan???– Base trade on sound science– May need to change trade rules

• Phased opening– Muscle cuts from animals under 30 months– Cattle under 30 months with ID

Web Site Toolswww.econ.iastate.edu/faculty/lawrence

• Iowa Farm Outlook• Historic Basis• Futures and Options researchwww.iowabeefcenter.org

Central contact for all things beef at Iowa State University