Cattle Situation and Outlook

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Cattle Situation and Outlook

• Derrell S. Peel
• Professor and Extension Livestock Marketing
  Specialist

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Weak U.S. Economy

• Irrational Fear Has Replaced Irrational
  Exuberance
• Loss of wealth and equity
• Consumer and business spending stalled
• Stimulus has little effect until consumer and
  business confidence returns
• Timing is uncertain but little improvement
  expected until late 2009 at the earliest

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Is the Bottom In?
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Personal Consumption ExpendituresBillion (Real
2000)
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Mortgage DebtBillion
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U.S. Personal Savings RatePercent of Disposable
Personal Income
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Total U.S. Imports, Exports and Trade
BalanceBillion , 2007
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Imports, Exports and Trade BalanceSelected
Countries/Regions, Billion , 2007
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Private Ownership of Public Debt
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Economic Output Change (2009, 2010 projected),
IMF
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Economic Output Change (2009, 2010 projected),
IMF
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Monthly Crude Oil Price
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M2 Money SupplyBillion , 1970-2008
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M2 Money SupplyBillion , April 2007-March 2009
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Cattle Outlook Uncertain

• Domestic demand is the big unknown
• Reduced pork and poultry supply is supportive
• Lack of consumer spending is the major demand
  issue.
• Consumers reducing expenditures more than
  quantity of beef consumption so far.
• More hamburger less steaks more at-home
  consumption
• Supply is a positive factor
• Small cattle inventories for foreseeable future
• Reduced beef supply in 2009.

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Other Issues

• International trade
• Beef exports supportive but uncertain in 2009
• Global macroeconomic weakness
• Stronger dollar
• Mexico (No. 1 export market) likely to decrease
  and other major markets vulnerable
• Industry structure
• Current lack of profitability increases odds of
  reduction in feedlot and packing capacity at some
  point

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Current SituationPrices
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January 1, 2009All Cattle and Calves
Cattle on Feed

• 1 TX 13,600
• 2 NE 6,350
• 3 KS 6,300
• 4 OK 5,400
• 5 CA 5,250
• 6 MO 4,250
• 7 IA 3,950
• 8 SD 3,700
• 9 WI 3,350
• 10 CO, MT 2,600

• 1 TX 2,800
• 2 NE 2,500
• 3 KS 2,370
• 4 IA 1,300
• 5 CO 1,020
• 6 CA 490
• 7 SD 390
• 8 AZ 358
• 9 OK 350
• 10 MN 280

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January 1, 2009Beef Cows
Beef Heifers

• 1 TX 5,170
• 2 OK 2,038
• 3 MO 1,992
• 4 NE 1,851
• 5 SD 1,616
• 6 KS 1,508
• 7 MT 1,494
• 8 KY 1,114
• 9 TN 951
• 10 FL 942

• 1 TX 790
• 2 OK 390
• 3 MT 385
• 4 MO, NE 320
• 5 SD 285
• 6 KS 255
• 7 ND 180
• 8 AR 165
• 9 KY 160
• 10 TN, WY 150

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January 1, 2008Feeder Supply
Stocker Ratio

• 1 TX 3,930
• 2 OK 2,345
• 3 KS 2,030
• 4 IA 1,580
• 5 MO 1,575
• 6 NE 1,500
• 7 CA 1,420
• 8 SD 1,165
• 9 WI 860
• 10 MN 825

• 0.802
• 1.203
• 1.353
• 1.411
• 0.776
• 0.852
• 0.707
• 0.694
• 0.632
• 0.982

Stocker Ratio Feeder Supply / Calf Crop U.S.
Avg 0.756
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Oklahoma All Cattle and Calves Since 1867
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Number of Operations with Cattle,By Size of
Operation
U.S. Total 967,440
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Percent of Cattle Inventory, by Size of Operation
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Current SituationDemand and Supply Factors
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Livestock Marketing Information Center Data
Source USDA/NASS
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Livestock Marketing Information Center Data
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International Trade
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Long Term FactorsThe Cattle Cycle
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U.S. All Cattle and Calves Since 1867
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Livestock Marketing Information Center Data
Source USDA/NASS
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Source USDA/NASS
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Oklahoma Cattle InventoryHead
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Oklahoma and U.S. Cattle Cycles Beef Cow
Inventory, January 1
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Source USDA/NASS
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Cattle on Feed as Percent of Estimated Feeder
Supplies, January 1
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Feed Markets
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Biofuels productionLargest producers
Million Gallons
Ethanol
Biodiesel
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Source USDA Agricultural Projections to 2017
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Bottom Line

• 2009 uncertain and tough for cattle industry
• Unlikely to see significant macroeconomic
  recovery before late 2009 at the earliest,
  perhaps well into 2010.
• Generally poor profitability for all sectors
• Demand is the key to how weak cattle prices will
  be in 2009
• If demand recovers, tight supplies will ensure
  that prices follow.
• Focus attention on managing costs

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