Beef Cattle Situation

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Beef Cattle Situation Outlook

• Curt Lacy
• University of Georgia

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Overview

• Current Situation
• 2007 Price Profit Outlook
• Long-term Outlook
• Things to Watch

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Current Situation
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Since September corn prices have more than
doubled!!
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During the same time, calf prices are down more
than 20
Livestock Marketing Information Center
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Livestock Marketing Information Center
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2007 Prices and Profits
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Livestock Marketing Information Center Data
Source USDA/NASS
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Livestock Marketing Information Center Data
Source USDA/NASS
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Livestock Marketing Information Center
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Livestock Marketing Information Center
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Projected Prices for 2007
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Projected Profits for 2007

• Assumes 100 cows with 85 calf crop weighing 523
  pounds marketed Aug-Sep
• Assumes 50 cows with 85 calf crop weighing 499
  pounds marketed Oct-Nov

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Now What? Where can you increase profits?

• Increase Price
• Consider risk management alternatives
• Increase production
• Increase conception rates
• ECONOMICALLY add weight through backgrounding or
  stockering programs
• Decrease Variable Costs
• What is your hay cost
• Where do you store your hay?
• Alternative feedstuffs?
• Decrease Fixed Costs Equipment Females
• Cull open cows
• Cull unproductive cows
• Increasing herd size ? lease cows instead of
  raising heifers

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What Can You Lock-in Today?-Futures Based Price
Predictions
Basis calculations for GA Auction Markets
IA/So. MN Live Cattle Markets
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Marketing Alternatives-Jan-Feb 2007
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Evaluating the Economics of Commodity Feeds

• Determine the current feed cost (/cow/day and
  /cwt. of calves marketed) including hay.
• Days of feeding
• Lbs./day
• /lbs.
• Determine the ingredient cost of commodity or
  alternative feed including hay.
• Days of feeding
• Lbs./day
• /lbs.
• Determine any additional labor, fuel, repair or
  other costs.
• Determine any additional facilities cost.
• Add 2-4 to arrive at total cost for alternative
  feed
• 5-1 Net advantage for alternative feed

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Alternative Feedstuffs Economics Calculator

• Excel spreadsheet
• Users enter current or base feeding scenario and
  alternative feeding scenario
• Users also enter cost info for additional
  facilities or equipment
• Net returns for the alternative feeding scenario
  are calculated on per herd and per cow basis

Alternative Feedstuffs Economics Calculator
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Longer Term Outlook
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BEEF COWS THAT HAVE CALVEDJANUARY 1,
2006(1000 Head)
SUPPLY FACTORS
Alaska Hawaii US Total
Livestock Marketing Information Center Data
Source USDA/NASS
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Livestock Marketing Information Center Data
Source USDA/NASS
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Livestock Marketing Information Center Data
Source USDA/NASS
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1.4
Livestock Marketing Information Center Data
Source USDA/NASS
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Relationship between Feeder Cattle, Calves and
Corn Prices DEMAND FOR FEEDERS
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Grain Prices and Beef Cattle

• 0.10 change in price of corn changes 550 GA
  Steer 1.00/Cwt.
• USDA projects the 2nd largest corn crop ever
  10.7 billion bushels
• However, corn usage up by 10.6 from 2005
• Exports 2.5
• Feed -1.40
• Food, seed and industrial 18.75
• U.S. average corn price expected to be
  2.90-3.30 for 2006/2007 marketing year
• Expected to be even higher in 2007/2008

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Ethanol Production and Impacts of Grain Cattle
Prices
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Ethanol Production
Source Renewable Fuels Association/Cattle-Fax
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Corn Utilized in Ethanol Production
Source USDA/ERS
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Key Points on Ethanol and Cattle

• 0.50 per gallon tax subsidy for ethanol
  production increases demand for corn and
  increases feed prices
• 1 bushel of corn yields about 2.7 gallons of
  ethanol
• Each 1 billion gallons of ethanol will consume
  370 million bushels of corn
• Increases in ethanol will require additional 5-10
  million acres of corn

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Price Outlook
Source USDA, LMIC and University of Georgia
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Ownership Strategies at Different Points in the
Cattle Cycle
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Big Picture Things to Consider

• Impacts of Ethanol on Feed Costs
• Source Verification
• Natural/Organic Markets
• National Animal ID
• MCOOL

Market
Political
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Summary Implications

• Supply
• The herd has expanded some but the drought has
  likely halted growth for this year
• It is likely that the drought will have longer
  term implications other than cow numbers
• Demand
• Demand for beef remains strong
• Higher corn prices will reduce demand for feeders
• Exports will help
• Profits
• Most cow-calf producers should be able to cover
  out of pocket expenses for next 2-4 years
• Higher feed, fuel and fertilizer costs will
  squeeze profits
• Lower prices for feeders may make retained
  ownership and heifer retention more feasible
• Know the RISKS!!!

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www.agecon.uga.edu