US Cattle Cycle

1
US Cattle Cycle
2
Cycles included

• Three time dimensions
• Seasonal Patterns
• Trends usually over a duration of years
• Cycles repeatable

3
Cycles included

• Seasonal Patterns
• Seasonal highs or lows within a years time

4
Cycles included

• 2) Trends
• - Shows long term directions
• - Allows one to conduct analysis of years

5
Cycles included

• 3) Cycle Repeats itself regularly over a period
  of years
• - Measured from one trough to the next
• - 6 cycles since 1928
• - Average length is 10 years (Shortest 8 years)
  longest currently 14th

6
(No Transcript)
7
Why does the cycle occur

• Upside
• - Producers respond to favorable years
• - More profits greater herd retention
• - more heifers retained less beef prices
  increase
• Down Side
• - Lower profits greater loses
• - Lower profits / greater loses
• - Herd liquidation (use net worth to pay bills)

8
Prices

• Cycle recorded high prices
• 1979 87.97
• 1991 100.20
• 2001 107.00
• 2003 115.00
• 2004 ???

9
(No Transcript)
10
(No Transcript)
11
Cycle Lows

• 1990 95.8 million
• 1996 105 million
• 2003 94.9 million (1 lower than last year)
• - Most of reduction is in the form of dairy
• - 2002 drought caused liquidation
• herd movement not slaughter
• - we know that beef cow numbers have
  stabilized at 32.8 million

12
Factors affecting the cycle

• 1) Inventory
• - Growth Rate

13
199095.8 mil
94.9
14
(No Transcript)
15
Indicators of herd buildup

• Cow slaughter less than 13 of Jan inventory
• Heifer slaughter Less than 38 of Jan inventory
• Greater than 12 retention

16
Indicators of herd buildup
17
Indicators of herd buildup

• Female slaughter peaks during lowest prices

18
Indicators of herd buildup

• Herd size follows increases in price

19
(No Transcript)
20
(No Transcript)
21
(No Transcript)
22
Factors affecting the cycle

• Inventory
• Beef Production

23
(No Transcript)
24
(No Transcript)
25
(No Transcript)
26
(No Transcript)
27
(No Transcript)
28
Beef production has increased

• Improvement in production efficiency
• Carcass weight
• - 1970s European breeds
• - 1980 use of growth promotants

29
(No Transcript)
30
Factors affecting the cycle

• Inventory
• Beef Production
• Environment

31
(No Transcript)
32
(No Transcript)
33
Putting it all together

• BSE Exports
• Environment

34
Putting it all together

• BSE Exports
• Environment
• Expansion??

35
Putting it all together

??
2006
2007
2008
36
Putting it all together
Sell older cows and pay off debt

??
2006
2007
2008
Purchase cows at lowest prices
37
(No Transcript)
38
(No Transcript)
39
(No Transcript)
40
(No Transcript)
41
(No Transcript)
42
(No Transcript)
43
(No Transcript)
44
(No Transcript)
45
(No Transcript)
46
(No Transcript)
47
Indicators of herd buildup

• Cow slaughter less than 13 of Jan inventory
• Heifer slaughter Less than 38 of Jan inventory
• Greater than 12 retention

48
(No Transcript)
49
(No Transcript)
50
(No Transcript)
51
(No Transcript)