Livestock Outlook

1. Livestock Outlook James Mintert, Ph.D. Professor & Extension State Leader Department of Agricultural Economics Kansas State University www.agmanager.info/livestock/marketing jmintert@ksu.edu

2. A Shrinking IndustryResponding to a Lack of Profitability Current inventory is about 26% smaller than in 1975

3. Rising Productivity Is Partially Responsible

4. But Weaker Demand Was Key Beef Demand 1980-1998

5. Measuring Changes In Beef Demand1998-2004 Demand in ’04 Was Up About 25% from 1998 Level

6. Measuring Changes In Beef Demand1998-2005 Beef Demand During All of ’05 Decreased About 4% But Demand in ’05 Was Still Up About 21% from 1998 Level

7. 1st Quarter Demand Index Fell About 5% Below A Year Ago

8. 2nd Quarter Demand Index Fell About 10% Below A Year Ago

9. Where Are We Headed? Beef Demand • Short run gains from low-carb diets behind us • Near term, look for weaker domestic demand • To stop the decline industry needs to innovate • Opportunities abound for innovators

10. International Trade Outlook

11. U.S. Has Been A Net Exporter Since 1981

12. Top 5 Importers Accounted for 91% of U.S. Exports U.S. needs to recapture these markets to regain $’s and volume

13. Cattle Imports from Canada Are IncreasingBut Remain Well Below 2002’s Record Level Jan-June 2006 imports 28% below 2002’s and 15% below 2001’s

14. Beef Imports From Canada Decline

15. Result: U.S. Imports Falling Below 2005’s

16. Where Are We Headed? Trade • U.S. strength is in high quality beef products • Regaining export markets could take years • Consumer incomes in importing countries are key to long-run growth in exports • Other countries may have comparative advantage in cow-calf production

17. Long, Slow Road to Export Recovery

18. Export Recovery Means Net Beef Imports in 2007 Could Be 1/2 2004’s

19. Supply Side in the U.S.

20. Mid-Year Inventory Was Above 2005’s, And…

21. Strong Profitability Encouraging Expansion, But…

22. Poor Pasture Conditions Could Be Holding Back Expansion Livestock Marketing Information Center Data Source: USDA/NASS

23. U.S. Beef Cow Slaughter Up 13% vs. 2005

24. But Female Slaughter Still Low

25. Through July, Still Looks Like Modest Expansion Underway

26. Slaughter Is Expected To Rise

27. Large On Feed Inventory

28. Drought Pushing Light Weight Placements Up

29. Weights Will Remain Heavy

30. And Beef Production Will Rise Cyclically

31. Summer Lows Are Behind Us

32. Futures Are Pretty Optimistic For Fall

33. Prices Could Wind Up Record High Again in ‘06

34. Despite Feedlot Losses, Feeders Remain Optimistic

35. Where Are Corn Prices Headed?Higher Corn Prices Spell Trouble for Livestock Producers Ethanol?

36. Cattle Feeders Have Pushed Prices Back Up

37. Feeders In ‘05 Averaged A Record High of $112/cwt.Prices in ’06 Could Wind Up Near ’05’s Average

38. Counter-Seasonal Price Path in Spring ‘06

39. Record High Calf Prices Again In ‘05Cycle Peak in ’05 & ‘06

40. What About 2007? Slaughter cattle prices in high $80’s during Q1 & Q2 ‘07 Feeder prices averaging about $110 - $112/cwt

41. Iowa Farrow to Finish Profits,1965-2005 1965-74: $10.04/head profit 1975-84: $14.22/head profit 1985-94: $10.51/head profit 1995-04: $ 0.52/head loss Source: John Lawrence, Iowa State University

42. Iowa Farrow to Finish Profits, 1994-2006 29 consecutive months of profit, longest since 33 months in 1976-79 Source: John Lawrence, Iowa State University

43. Surprisingly Slow Growth in Slaughter

44. Pork Production Expected To Rise Next Several Years

45. Export Growth Has Been Phenomenal

46. National Weighted Avg. Hog PricesNegotiated Base Price Per Carcass Hundredweight

47. www.agmanager.info/livestock/marketing