Five year Forecast and Analysis on the United States Cattle Market published by Doane Advisory Service in December, 2009. This report price starts from US $ 2000.
Abstract
SUMMARY
The cattle herd has been contracting since 2007. Drought, rising feed costs
and poor margins for feeders and cow/calf producers all contributed to the
decline in cattle numbers. The total inventory of cattle herd edged down from
96.6 million head in 2007 to 94.5 million head as of January 1, 2009. Input
costs have moderated over the past year, but fed cattle along with feeder
cattle and calf prices have also declined. The cattle herd is expected to
continue to decline into early 2011 with the inventory falling to 93 million
head. From that level, the total inventory rebuilds slowly to 94.15 million
head by January 1, 2015.
Feeding margins have been negative most months for the past two years.
Profitability for cow calf producers has also suffered. Higher calf prices are
needed in order to boost profits and incentivize producers to begin to slow
cow slaughter, retain heifers and thereby expand the breeding herd. The
economic recession has hurt beef demand. Even with beef production down 2
percent this year, average fed cattle prices will be down more than $9 per cwt
from a year ago to $83.57 per cwt. We estimate that wholesale beef demand is
down 5 percent to 7 percent this year compared to the past few years. Demand
from restaurants has been particularly weak reflected in part by the narrow
spread between choice and select beef prices. Normally, choice beef is a $9 to
$10 per cwt premium to select. This year the premium has averaged only about
$5 per cwt. For brief periods select beef has even traded to a slight premium
to choice. Retail prices were sticky, but did begin to work lower in the
second half of the year which helped stimulate consumer demand at the grocery
store. Even so, the farmer' s share of revenue has declined and wholesale to
retail spreads remain historically wide.
Cow slaughter is a key factor signaling expansion or contraction of the herd.
Total cow slaughter is down only 1 percent from a year ago as the diary cow
slaughter has nearly offset lower beef cow slaughter. Beef cow slaughter is
down 8 percent in 2009. While that appears to be a large year-toyear decline,
beef cow slaughter was high in 2008 and the overall level of cow slaughter
remains historically high. Canadian slaughter cow imports often impacts U.S.
slaughter rates, but imports from Canada this year are about steady with 2008.
In addition, heifer slaughter rates are steady with a year ago, showing no
sign yet that cow/calf producers are holding back heifers for cow herd
expansion. The beef cow herd will contract modestly into early 2010 and then
turn higher in 2011 through the remainder of the five-year forecast.
Commercial cattle slaughter for 2009 will be down 3.6 percent from a year ago.
However, dressed cattle weights are up 6 pounds from a year ago to 779 pounds.
The heavier weights partially offset the lower slaughter resulting in beef
production down 2.1 percent in 2009. Weights are forecast to continue to
increase over the five-year forecast. Fed cattle prices will average about
$84.00 in the fourth quarter of 2009, down $5.25 per cwt from a year ago. The
steep decline in prices this year has pulled the annual average down slightly
from our previous forecast. Choice steer prices are forecast to average $90
per cwt in 2010 as cattle supplies tighten next year, move to $92 in 2011 and
remain in the low $90s through the remainder of the five-year forecast.
Feedlot placements were below the previous year for more than a year through
early summer as high feed costs and negative feeding margins caused feedlots
to cut back on placements. However, as corn prices eased during the summer,
feedlots placements picked-up compared to a year ago. Feedlots also placed
heavier calves in order to limit their time on feed. Higher summer and early
fall placements along with increasing weights are expected to boost beef
production in the fourth quarter of 2009 and carry into the first quarter of
2010. If realized, it would be the first quarterly increase in beef production
since the fall quarter of 2008. Placements have eased again this fall as corn
prices rebounded on harvest delays and the increased threat of field losses.
Beef exports were stronger through the first half of the year, but have
trailed off during the second half. Third quarter exports were down 19 percent
from the same period a year ago. Exports during October (the latest reporting
month) were steady with a year ago, but exports are expected to be down in
November and December, resulting in a 2 percent decline for 2009 overall.
Yearto- date exports to Japan, Vietnam and Hong Kong are higher, but exports
to Mexico and Canada are lower, down 16 percent and 10 percent, respectively.
Even though South Korea has eased restrictions, U.S. exports to them are down
20 percent. Canada and Mexico are the largest markets for U.S. beef. Sales to
these countries are down from a year ago as weak economies have dulled demand
for U.S. beef. Beef exports are expected to improve over the five year
forecast, climbing to 2.4 million pounds for 2014. The U.S. remains a net beef
importer with Australia, Canada and New Zealand accounting for the majority of
beef imports.
Cattle on feed as of December 1 were down 1 percent from a year ago to 11.3
million head. Beef production is forecast to decline by 1.6 percent in 2010 to
25.7 billion pounds, the lowest level since 2005. Production holds about
steady in 2011 and then edges higher through 2014. Cattle prices have been
weak despite lower beef supplies. Beef demand has suffered as the economy
slipped deeper into recession. While we expect supplies to tighten further in
2010, we also anticipate modest improvement in the economy, which should boost
demand and prices. Our budgets suggest that feedlots should turn profitable by
the second quarter of 2010. Improved margins should also translate into higher
feeder cattle and calf prices. This will encourage producers to begin to
expand the cow herd by late 2010 or early 2011, thereby launching the
beginning of another expansion phase of the cattle cycle.
Table of Contents
- Summary
- Weekly Cattle Prices
- Cattle Inventories
- Annual Beef Production
- Beef Exports
- Annual Fed Cattle Prices
- Feedlot Profits
- Feeder Cattle and Calves Price
