2013 Cattle Market Situation and Outlook Derrell S. Peel Breedlove Professor of Agribusiness and Livestock Marketing Specialist 2012 Recap • Widespread drought in U.S. – Continued herd liquidation – Not as severe in Oklahoma this summer • Limited water and forage for winter • Record high grain and forage prices • Record high cattle prices – Reduced cow-calf profitability – Poor feedlot and packer margins • Higher wholesale and retail beef prices – Limited beef demand – Weaker beef exports BOXED BEEF CUTOUT VALUE Choice 600-900 Lbs. Carcass, Weekly $ Per Cwt. 205 195 Avg. 2006-10 185 175 2011 165 155 2012 145 135 JAN APR Livestock Marketing Information Center Data Source: USDA-AMS JUL OCT C-P-62 11/05/12 SLAUGHTER STEER PRICES Southern Plains, Weekly $ Per Cwt. 135 130 125 120 115 110 105 100 95 90 85 80 JAN Avg. 2006-10 2011 2012 APR Livestock Marketing Information Center Data Source: USDA-AMS JUL OCT C-P-52 11/05/12 MED. & LRG. #1 FEEDER STEER PRICES 700-800 Pounds, Southern Plains, Weekly $ Per Cwt. 170 160 Avg. 2006-10 150 140 130 2011 120 110 2012 100 90 JAN APR Livestock Marketing Information Center Data Source: USDA-AMS, Compiled & Analysis by LMIC JUL OCT C-P-49 11/05/12 MED. & LRG. #1 STEER CALF PRICES 400-500 Pounds, Southern Plains, Weekly $ Per Cwt. 235 Avg. 2006-10 215 195 175 2011 155 135 2012 115 JAN APR Livestock Marketing Information Center Data Source: USDA-AMS, Compiled & Analysis by LMIC JUL OCT C-P-49A 11/05/12 SLAUGHTER COW PRICES Southern Plains, 85-90% Lean, Weekly $ Per Cwt. 90 Avg. 2006-10 80 70 2011 60 50 2012 40 JAN APR Livestock Marketing Information Center Data Source: USDA-AMS JUL OCT C-P-35 11/05/12 2013 Cattle Market Environment • Continued drought? – More liquidation • …Or normal weather – More heifer retention • Tighter cattle supplies…into 2014 • Beef demand is the key unknown – tied to general economy JANUARY 1 FEEDER CATTLE SUPPLIES Residual, Outside Feedlots, U.S. Mil. Head 50 48 46 44 42 40 38 36 34 32 30 28 26 24 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 Data Source: USDA-NASS, Calculations by Derrell Peel 2013 Cattle Market Expectations • Cattle and beef prices pushed higher by limited supplies – Beef production down by 4-4.5% • • • • Beef demand will limit price increases Question is “How much higher?” Moderation in feed prices Higher cow and heifer prices (if no drought) – Breeding cow and heifer demand BEEF PRODUCTION vs. CATTLE INVENTORY Inventory on January 1, U.S. Mil. Head 120 Bil. Pounds 28 Commercial Beef Production 27 115 110 26 105 25 100 24 95 23 Total Cattle Inventory 90 22 1987 1990 1993 1996 Livestock Marketing Information Center Data Source: USDA-AMS, Compiled & Analysis by LMIC 1999 2002 2005 2008 2011 2014 M-S-23 08/10/12 Cattle Sector Implications • Cow-calf – Good profit potential; cost management key – Rebuilding strategy and costs – Producer transition • Stocker – Good value of gain • Feedlots and packers will continue to struggle – Loss of capacity likely • Production challenges bigger than marketing challenges Price-Weight Relationship Medium/Large No. 1 Steers, 7 Oklahoma Auctions $210.00 $190.00 $180.00 November 9, 2012 $170.00 $160.00 $150.00 $140.00 weight (pounds) 925 875 825 775 725 675 625 575 525 475 425 $130.00 375 Price ($/cwt) $200.00 Steer Price, Total Value and Value of Gain November 9, 2012, 7 Auction, Oklahoma Weight Average Total (lbs) Price Value ($/cwt.) ($/hd) 400 450 500 550 600 650 700 750 800 850 900 $189.13 $174.39 $163.67 $154.76 $149.41 $147.55 $145.52 $144.47 $143.66 $142.76 $139.73 $757 $785 $818 $851 $896 $959 $1,019 $1,084 $1,149 $1,213 $1,258 VOG 400 lb. Beg. Weight ($/lb.) $0.56 $0.62 $0.63 $0.70 $0.81 $0.87 $0.93 $0.98 $1.02 $1.00 VOG 450 lb. Beg. Weight ($/lb $0.67 $0.66 $0.74 $0.87 $0.94 $1.00 $1.04 $1.07 $1.05 VOG 500 lb. Beg. Weight ($/lb.) $0.66 $0.78 $0.94 $1.00 $1.06 $1.10 $1.13 $1.10 VOG 550 lb. Beg. Weight ($/lb.) $0.91 $1.08 $1.12 $1.16 $1.19 $1.21 $1.16 VOG 600 lb. Beg. Weight ($/lb.) $1.25 $1.22 $1.25 $1.26 $1.27 $1.20 VOG 650 lb. Beg. Weight ($/lb.) $1.19 $1.25 $1.27 $1.27 $1.19 ANNUAL AVERAGE CATTLE PRICES Southern Plains $ Per Cwt 500-600lb Steer Calves 175 155 135 700-800lb Feeder Steers 115 95 Fed Steers 75 55 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Livestock Marketing Information Center Data Source: USDA-AMS, Compiled & Analysis by LMIC C-P-06 09/23/12 Agricultural Economics