Cattle Outlook

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Cattle Outlook Risk Management Using
BeefBasis.com

• James Mintert, Ph.D.
• Professor Extension State Leader
• Department of Agricultural Economics
• Kansas State University
• Garden City, KS
• October 3, 2007
• www.agmanager.info/livestock/marketing
• jmintert_at_ksu.edu

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A Picture of A Healthy Industry
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A Shrinking IndustryResponding to a Lack of
Profitability
Current inventory is about 26 smaller than in
1975
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But Weaker Demand Was Key Beef Demand 1980-1998
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Downturn Got Underway in mid-2005Rebound In
Spring 2007?
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Beef Demand ShiftersWhats been taking place
recently?

• Demand index does not indicate why shifts occur
• Possible reasons for recent downturn
• Low carb diet effect has worn off
• Consumers disposable income growth slowing
• Domestic demand could remain soft
• How do we turn this around?

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International Trade Outlook
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U.S. Was A Net Exporter From 1981-2003
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Top 5 Importers Accounted for 91 of U.S. Exports
U.S. needs to recapture these markets to regain
s and volume
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Gains In Japan Have Been Small
Jan-July 07 Was Still 84 Below Jan-July 03
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Where Are We Headed?

• Trade
• U.S. strength is in high quality beef products
• Will higher corn prices erode this advantage?
• Regaining market share will take several years
• Market access is key
• Korea Japan
• Consumer incomes in importing countries are key
  to long-run growth in beef exports
• Other countries may have comparative advantage in
  cow-calf production

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Supply Side in the U.S.
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Strong Profitability Encouraging Expansion, But
Drought Conditions Discouraged Expansion in 06
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And Expansion Still Appears To Be On
HoldJanuary-mid-Sept. Beef Cow Slaughter Up 7
vs. 2006
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Plains Pastures Are Much Better Than In 06
Data Source USDA/NASS, LMIC
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But U.S. Conditions Still Worse Than Average
Source USDA/NASS LMIC
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Modest Slaughter Decline Expected in 08
Excess slaughter capacity means spread between
live and wholesale prices will remain tight
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Narrow Processor Margins Are Supporting Slaughter
Cattle Prices
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On Feed Inventory Below A Year Ago
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Placements Down Sharply This Summer
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Changing Composition of Placements On Feed
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Weathers Impact On Performance Held Weights
Down Until Recently
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Long Term Trend Is Still Toward Higher Weights
Weights Expected To Be Above Year Earlier This
Fall Winter
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Little Change in Beef Production Expected in 08
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Prices Have Rallied
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Record High Prices in 07 Again in 08
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Futures Forecast Prices Over 100 in Late Winter
Early Spring
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Feeders Climbing Back Near 120
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Strong Fed Cattle Prices Supporting Feeder
ValuesFeed Grain Prices Will Be Key
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But Feeder Futures Forecast Weaker Prices This
Winter
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Calf Prices Rebounded Sharply This Summer
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Feed Costs Will Be A Big Factor in Calf Price
OutlookCycle Peak was in 05
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Ethanol, Corn Prices, Cattle
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Implications for Cattle Feeding Industry

• Where Will Future Expansion Take Place?

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A Growing Industry
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Southern Plains Feeders Losing Market Share?
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Cattle Feeding Shifting North?
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174,000 head
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165,000 head
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Cattle Feeding Shifting North?
195,000 head
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Key Points

• Strong slaughter cattle prices ahead in 07 08
• Herd expansion in U.S. cut short
• Slow export market recovery
• Domestic demand could be weak
• High feed grain prices are the new reality
• High corn price volatility is also the new
  reality
• Feeder calf prices supported by high fed cattle
  prices
• would be even higher with lower feed costs
• Upper Midwest DGS concentration will encourage
  feeding expansion in the North

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Improved Feeder Cattle Basis Forecasts
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Forecasts From Two Different Models Provided 750
Lb. Steer Basis Forecasts, Amarillo, TX Forecasts
For 10.31.2007
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Sensitivity Analysis Provided Impact of Changes
in Corn Live Cattle Prices on Basis 750 Lb.
Steer Basis Forecast for 10.31.2007, Amarillo, TX
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Need A Forecast For A Different Weight? Go Back
To The Input Screen Change It
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Other Tools Available on BeefBasis.comExamine
Download Historical Market Data
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Make Comparisons Between 2 or More
MarketsExample OKC vs. Pratt, KS
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Compare Average Price By Month, Year-By-YearOKC
Medium Large, 1 700-750 Lb. Steers
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• Visit
• www.agmanager.info
• www.beefbasis.com
• Thank You!