Livestock report
By Glenn Grimes

Cattle
U.S. beef exports for January to September 2007 were up 26.2 percent from a year earlier. Beef imports for this 9-month period were up 2.8 percent but net beef imports as a percent of U.S. production declined from 7.8 percent in 2006 to 7 percent in 2007.

Imports of live feeder cattle from Mexico were down 19.6 percent for 2007 through September; however, live cattle imports from Canada were up 25 percent. Total live cattle imports for January to September were up 0.8 percent compared to these 9 months in 2006.

Cattle marketings in November finally dropped below a year earlier and fed cattle prices moved into the mid $90s, live weight. Prices for live fed cattle are expected to continue in the mid to upper $90s through mid-winter.

Retail beef prices for January to October were 4.5 percent above the same months of 2006. Retail beef prices are expected to continue above a year earlier through the first few months of 2008.

All segments of the beef industry except packers benefited from higher retail prices in the first 10 months of 2007. Fed cattle prices for January to October were 7.8 percent above the same months of 2006. The processor/retailer margin for these months was 9.4 percent wider, but the packer margin was 17.5 percent narrower than a year earlier. Margins for beef packers have not been good, on average, since the cow with BSE was found in Canada in 2003.

For January to October 2007, demand for live fed cattle and for beef at the consumer level were both positive. For these 10 months, the mid-point estimate of our demand index showed consumer demand for beef was up 0.9 percent. Demand for live fed cattle was up substantially with growth of 3.7 percent. The relatively large increase in beef exports was partly responsible for the larger increase in the demand for live cattle than the demand for beef by domestic consumers.

Even with a record 13.2 billion bushel corn harvest, USDA expects corn prices will average near $3.50 per bushel for the 2007-08 marketing year. This is a 30-cent per bushel increase over their October estimate and is probably due mostly to high soybean prices. High soybean prices could cause some shifting of corn acreage back to soybeans in 2008, so corn prices are expected to continue strong to keep too many acres from being shifted back to soybeans.

Even with high corn prices, fed cattle prices were high enough through November 2007 to hold feeder cattle prices above a year earlier. For the week ending November 24, the price of 400-500 lb. steer calves at Oklahoma City was about $1 per cwt. higher than a year earlier and 700 to 800 lb. yearling steers were about $9 per cwt. higher than 12 months earlier.

Since November was the fifth consecutive month with lower numbers of cattle on feed, marketings of fed cattle are expected to continue light enough to hold cattle prices strong through winter.

Cow slaughter continues to run high and we believe will result in a slightly smaller U.S. cow herd in 2008. 

Swine
The low hog prices in the fall and winter were due to large quantities of hogs and pork and not weak demand. Demand for pork and live hogs was doing well. For January to October 2007, our demand index for pork at the consumer level showed a 2.3 percent increase and at the live hog level showed a 3.2 percent increase. Current data indicate the possibility of killing over 30 million hogs in the fourth quarter of 2007.

Pork exports for September 2007 were up over 9 percent from a year earlier. With this growth in September, exports for the January-September period were down only 0.2 percent. The value of pork exports during the first 9 months of 2007 was up more than 6 percent over this period in 2006. Even though the tonnage of pork exports was down a little, we still believe export value is a portion of the reason our demand index for live hogs increased more than demand for pork at the retail level.

Based on USDA data, all segments of the pork industry benefited from the 2.1 percent increase in retail prices for pork during the first 10 months of 2007 compared to 2006. The processor-retailer margin increased 2.6 percent, the packer margin increased 1.8 percent, and live hog prices were up 2.6 percent.

However, in the fall of 2007 the average cost producer who did not forward price hogs through the futures market experienced losses of as much as $40 per hog at times. Without the stronger demand for live hogs experienced during the fall, the high level of production in October and November could have caused substantially bigger losses. Had live hog demand remained at the 2006 level, actual losses per hog would have been $12 to $15 per head more than they were.

Higher production costs also contributed to producers’ losses. In October, production costs for the average Midwest hog producer were about $50 per cwt. USDA is forecasting corn prices of $3.50 per bushel as the midpoint for the estimate for the 2007/08 crop marketing year, even with this year’s record 13.2 billion bushel corn crop. The major reason for the high corn price is the contest between soybeans and corn for acres. Some of the acres that were switched to corn in 2007 are expected to be back in beans in 2008. With soybean prices near double digits, corn prices will need to stay strong to retain acreage.

Pig prices are expected to continue to be relatively low because of high feed prices and the lower slaughter hog prices expected.

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