dr. derrell peel - opportunity and risk with record cattle prices

Opportunity and Risk with Record Cattle Prices

Derrell S. Peel

Breedlove Professor of Agribusiness and

Extension Livestock Marketing Specialist

Oklahoma State University

2014 IOWA BEEF INDUSTRY CONVENTION

FED, FEEDER AND CALF PRICES,

Iowa Auctions and 5 Mkt Fed,

Weekly

80

100

120

140

160

180

200

220

240

260

280

300

2009 2010 2011 2012 2013 2014

$ Per Cwt.

Fed 7-800 lb. Steers 5-600 lb.Steers

Major Beef Market Factors

• Cattle Inventory and Beef Production

• Beef Demand

• International Trade

• Feed and Input Markets

• Forage Conditions

C-P-06

10/28/14

50

75

100

125

150

175

200

225

250

275

300

1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

$ Per Cwt

AVERAGE ANNUAL CATTLE PRICESSouthern Plains

500-600lb Steer Calves 700-800lb Feeder Steers Fed Steers

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

Livestock Marketing Information Center

C-P-62

10/27/14

140

160

180

200

220

240

260

280

JAN APR JUL OCT

$ Per Cwt.

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

Avg. 2008-12 2013 2014

Data Source: USDA-AMS


WHOLESALE BEEF PRICE

Choice, Monthly

120

130

140

150

160

170

180

190

200

210

220

230

240

250

260

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

$ Per Cwt


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

C-P-35

11/24/14

45

55

65

75

85

95

105

115

125

135

145

JAN APR JUL OCT

$ Per Cwt.

SLAUGHTER COW PRICESSouthern Plains, 85-90% Lean, Weekly

Avg. 2008-12 2013 2014



CATTLE INVENTORIES

C-N-01

07/28/14

80

90

100

110

120

130

140

1954 1959 1964 1969 1974 1979 1984 1989 1994 1999 2004 2009 2014

Mil. Head

JANUARY 1 TOTAL CATTLE INVENTORYU.S., Annual

-1.8 Percent

2014 = 87.7 Million Head

Data Source: USDA-NASS


U.S. Beef Cow Inventory1920-2014

0

5

10

15

20

25

30

35

40

45

50

19

20

19

25

19

30

19

35

19

40

19

45

19

50

19

55

19

60

19

65

19

70

19

75

19

80

19

85

19

90

19

95

20

00

20

05

20

10

Mill

ion

He

ad

TOTAL BEEF COW INVENTORY BY CYCLEU.S., January 1

28

29

30

31

32

33

34

35

36

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14

Mil. Head

1990-04

2004-14

C-N-40

01/31/14Livestock Marketing Information Center

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

JANUARY 1 BEEF COW INVENTORY

Iowa, Annual

600650700750

800850900950

10001050

110011501200

1990 1993 1996 1999 2002 2005 2008 2011 2014

1000 Head



C-N-30

07/28/14

20

25

30

35

40

1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014

Mil. Head

JANUARY 1 FEEDER CATTLE SUPPLIESResidual, Outside Feedlots, U.S.



C-N-38

07/28/14

4.5

5

5.5

6

6.5

7

1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014

Mil. Head

HEIFERS HELD AS BEEF COW REPLACEMENTSJanuary 1, U.S.

+1.7 %



HEIFERS ON FEEDQuarterly

3200330034003500360037003800390040004100420043004400450046004700

JAN-MAR APR-JUN JUL-SEP OCT-DEC

1000 Head

Avg.

2006/10

2011

2012

2013

2014

M-S-01


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

C-S-12

11/20/14

625

675

725

775

825

875

JAN MAR MAY JUL SEP NOV

Thou. Head

HEIFER SLAUGHTERFederally Inspected, Monthly

Avg. 2008-12 2013 2014



C-S-20

11/20/14

170

190

210

230

250

270

290

310

330

350


Thou. Head

BEEF COW SLAUGHTERFederally Inspected, Monthly

Avg. 2008-12 2013 2014



HEIFER RETENTION AND COW CULLING

as % of January 1 Cow Herd

14%

15%

16%

17%

18%

19%

20%

1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016

Heifer %

7%

8%

9%

10%

11%

12%

13%

Culling %

Analysis by Derrell Peel


Average:Heifer % = 17.1Culling % = 9.7

Cows

Heifers

JANUARY 1 BEEF COW INVENTORYU.S., Annual

28

30

32

34

36

38

40

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

Mil. Head

Analysis by Derrell Peel

Data Source: USDA-NASS22 Sep 2014

U.S. Ave., -11.0 %

Change in Beef Cow Inventory, January 1, 2007-2014

-21.1%

-7.0%

+6.8%

-5.9%-5.3%

-3.4%-5.7%

-12.0%-1.75, 2011

-15.9%+6.1, 2011

-5.5%

-25.1%-3.7%, 2011

-13.6%

-7.7%

-16.2%

+0.3%

+2.0%

-7.4%

-23.1%

-2.3%-17.9%

-4.2%

-12.4%-5.0%

-11.0%

-13.6%

-8.2%

-9.4%

-2.3

%

-14.3%

-8.2%

+2.4%

+5.6%

+13.3%

-2.9%

-7.5%

U.S. Ave., -3.6 %

Percent Change in Pasture Acreage,

2007-2012

-13.1%

-1.6%

-3.0%

-1.1%+0.2%

+2.6%-7.2%

-4.4%+0.2%

-2.4%

-1.4%

-11.5%

+5.8%

-18.9%

-5.7%

-4.9%

-3.8%

-9.9%

-9.7%-23.5%

-1.4%

-21.2%-5.6%

+0.30%

-31.0%

-8.7%

-15.9%

-19

.0%

-20.8%

-9.6%

-14.8%

-23.6%

-16.6%

-15.1%

-2.6%

IOWA ALL HAY ACREAGE

Harvested Acres

900

1000

1100

1200

1300

1400

1500

1600

1700

1800

1900

2000

2100

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Thousand

G-NP-19


Data Source: USDA-NASS, Compiled & Forecasts by LMIC

U S ALL HAY ACREAGE

Harvested Acres

54000

56000

58000

60000

62000

64000

66000

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Thousand

G-NP-19



C-N-10

11/21/14

9.5

10

10.5

11

11.5

12

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Mil. Head

CATTLE ON FEEDUS Total, Monthly

Avg. 2008/12 2013 2014



G-NP-03

10/10/14

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

$ Per Bushel

NATIONAL AVERAGE CORN PRICECrop Year, Received by Farmers



C-P-21

11/20/14

75

100

125

150

175

200

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

$ Per Cwt

CHOICE STEER PRICE vs BREAKEVENCattle Feeding, S. Plains, Monthly

Steer Price Breakeven Projected Breakeven



Latest Data: October 2014

C-P-22

11/20/14

-325

-275

-225

-175

-125

-75

-25

25

75

125

175

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

$ Per 1000 lbs

AVERAGE RETURNS TO CATTLE FEEDERSFeeding 725 Lb. Steers. S. Plains, Monthly



Latest Data: October 2014

Share of Cattle on FeedIowa and Nebraska, 12 Month Moving Ave.

21.0%

23.0%

25.0%

27.0%

29.0%

31.0%

Jan

-97

Jan

-98

Jan

-99

Jan

-00

Jan

-01

Jan

-02

Jan

-03

Jan

-04

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Jan

-14

Share of Cattle on FeedTexas and Oklahoma, 12 Month Moving Ave.

21.0%

23.0%

25.0%

27.0%

29.0%

31.0%

Jan

-97

Jan

-98

Jan

-99

Jan

-00

Jan

-01

Jan

-02

Jan

-03

Jan

-04

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Jan

-14

Texas Triangle and Omaha Corn

Prices

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

2011 2012 2013 2014

$ Per Bushel

Omaha

Texas



C-S-09

10/23/14

2200

2300

2400

2500

2600

2700

2800

2900

3000

3100


Thou. Head

COMMERCIAL CATTLE SLAUGHTERMonthly

Avg. 2008-12 2013 2014



C-S-16

11/20/14

1050

1150

1250

1350

1450

1550

1650


Thou. Head

STEER SLAUGHTERFederally Inspected, Monthly

Avg. 2008-12 2013 2014



C-S-18A

11/29/14

760

770

780

790

800

810

820

830

840

JAN APR JUL OCT

Pounds

CATTLE DRESSED WEIGHTFederally Inspected, Weekly

Avg. 2008-12 2013 2014

Data Source: USDA-AMS & USDA-NASS


C-S-18

11/29/14

810

820

830

840

850

860

870

880

890

900

910

JAN APR JUL OCT

Pounds

STEER DRESSED WEIGHTFederally Inspected, Weekly

Avg. 2008-12 2013 2014

Data Source: USDA-AMS & USDA-NASS


Steer Dressed WeightsMonthly, Federally Inspected

760

780

800

820

840

860

880

900

920

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Po

un

ds

Steer Carcass Weight

Federally Inspected

600

625

650

675

700

725

750

775

800

825

850

875

900

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Pounds

M-S-02

10/23/14

1700

1800

1900

2000

2100

2200

2300

2400


Mil. Pounds

COMMERCIAL BEEF PRODUCTIONMonthly

Avg. 2008-12 2013 2014



BEEF PRODUCTION

vs. BEEF COW INVENTORYInventory on January 1, U.S.

28

29

30

31

32

33

34

35

36

37

1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017

Mil. Head

22

23

24

25

26

27

28

Bil. Pounds

Commercial Beef Production

Beef Cow Inventory

M-S-23


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

2014/2015 Meat Production and Consumption

Production ConsumptionPer Capita

ConsumptionChange

2013 2014 2015 2014-2015

2015 2014-2015

Million lbs.

Millionlbs.

Millionlbs.

% Retail Lbs. %

Beef 25829 24501 24155 -1.4 53.4 -1.7

Pork 23206 22920 23475 +2.4 46.3 +0.4

Broilers 37425 38049 39577 +4.0 84.7 +2.0

M-P-11

11/21/14

400

450

500

550

600

650


Cents Per Pound

RETAIL BEEF PRICEAll Fresh, Monthly

Avg. 2008-12 2013 2014

Data Source: Bureau of Labor Statistics & USDA-ERS


RETAIL BEEF PRICEMonthly

350

375

400

425

450

475

500

525

550

575

600

625

650

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

$ Per Cwt

All Fresh

Choice



M-P-21

12/01/14

450

500

550

600

650

700

750

800

850

900

950

JAN APR JUL OCT

Cents Per Cwt.

WHOLESALE BEEF RIBEYE PRICESBoneless, Light, Weekly

Avg. 2008-12 2013 2014



M-P-23

12/01/14

700

800

900

1000

1100

1200

1300

1400

JAN APR JUL OCT

$ Per Cwt.

WHOLESALE BEEF FULL TENDER PRICESMusl-On, 5 Pounds and Up, Weekly

Avg. 2008-12 2013 2014



140

160

180

200

220

240

260

280

300

320

340

JAN APR JUL OCT

$ Per Cwt.

WHOLESALE BEEF CHUCK PRICESBoneless 2 Piece, Weekly

Avg. 2008-12 2013 2014


Livestock Marketing Information Center12/01/14

M-P-22

12/01/14

140

160

180

200

220

240

260

280

300

320

JAN APR JUL OCT

$ Per Cwt.

WHOLESALE BEEF BOTTOM ROUND PRICES18-33 Pounds, Weekly

Avg. 2008-12 2013 2014



M-P-24

12/01/14

140

160

180

200

220

240

260

280

300

320

JAN APR JUL OCT

$ Per Cwt.

WHOLESALE BONELESS BEEF PRICESFresh, 90% Lean, Weekly

Avg. 2008-12 2013 2014



M-P-25

12/01/14

50

70

90

110

130

150

170

JAN APR JUL OCT

$ Per Cwt.

WHOLESALE BONELESS BEEF PRICESFresh, 50% Lean, Weekly

Avg. 2008-12 2013 2014



INTERNATIONAL TRADE

I-N-16

11/05/14

150

170

190

210

230

250

270


Mil. Pounds

US BEEF AND VEAL EXPORTSCarcass Weight, Monthly

Avg. 2008-12 2013 2014

Data Source: USDA-ERS & USDA-FAS


I-N-06

08/29/14

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1991 1994 1997 2000 2003 2006 2009 2012 2015

Bil. Pounds

US BEEF AND VEAL EXPORTSCarcass Weight, Annual

Data Source: USDA-ERS & USDA-FAS, Compiled & Analysis by LMIC


I-N-15

11/05/14

145

165

185

205

225

245

265

285


Mil. Pounds

US BEEF AND VEAL IMPORTSCarcass Weight, Monthly

Avg. 2008-12 2013 2014

Data Source: USDA-ERS & USDA-FAS


I-N-12

08/29/14

1.5

2.0

2.5

3.0

3.5

4.0

1991 1994 1997 2000 2003 2006 2009 2012 2015

Bil. Pounds

US BEEF AND VEAL IMPORTSCarcass Weight, Annual



I-N-13

07/16/14

0

500

1000

1500

2000

1988 1991 1994 1997 2000 2003 2006 2009 2012

Thou. Head

CATTLE IMPORTS FROM CANADA AND MEXICO

Annual

Mexico Canada



Price-Weight RelationshipMedium/Large No. 1 Steers, December 8, 2014

200215230245260275290305320335350365

375

425

475

525

575

625

675

725

775

825

875

925

weight (pounds)

Pri

ce

($

/cw

t) Iowa

Okla

Price-Weight RelationshipMedium/Large No. 1 Steers, September 12, 2014

200215230245260275290305320335350365

375

425

475

525

575

625

675

725

775

825

875

925

weight (pounds)

Pri

ce

($

/cw

t) Iowa

Okla

Steer Price, Total Value and Value of Gain December 8, 2014, Iowa Combined

Weight (lbs)

Average Price ($/cwt.)

Total Value ($/hd)

VOG400 lb. Beg. Weight($/lb.)

VOG450 lb. Beg. Weight($/lb





400 $340.48 $1,362

450 $322.47 $1,451 $1.78

500 $311.48 $1,557 $1.95 $2.13

550 $292.35 $1,608 $1.64 $1.57 $1.01

600 $275.63 $1,654 $1.46 $1.35 $0.96 $0.92

650 $262.91 $1,709 $1.39 $1.29 $1.01 $1.01 $1.10

700 $252.52 $1,768 $1.35 $1.27 $1.05 $1.06 $1.14 $1.17

750 $246.47 $1,849 $1.39 $1.32 $1.16 $1.20 $1.30 $1.40

800 $236.98 $1,896 $1.33 $1.27 $1.13 $1.15 $1.21 $1.25

850 $230.15 $1,956 $1.32 $1.26 $1.14 $1.16 $1.21 $1.24

900 $227.27 $2,045 $1.37 $1.32 $1.22 $1.25 $1.31 $1.35

C-P-66

09/10/14

-100

0

100

200

300

400

500

1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

$ Per Cow

ESTIMATED AVERAGE COW CALF RETURNSReturns Over Cash Cost (Includes Pasture Rent), Annual

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


2015 Market Situation

• Strong prices for cattle and beef

• Record cow-calf returns

• Value of gain for stocker production

• Market versus production risk

• Margin squeeze for feedlots and packers

• Beef demand challenges

• Continued herd rebuilding– If no drought

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dr. derrell peel - opportunity and risk with record cattle prices

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usdanass12 data source

lmic6 data source

lmic24 data source

lmic15 data source

lmic31 data source

derrell peeldata source

compiled analysis

compiled forecasts