Livestock report
By Glenn Grimes

Cattle
The average retail price for choice beef in November 2007 was 4.9 percent above a year ago. Retail beef prices for the first 11 months of 2007 averaged 4.7 percent higher than these months of 2006. All of the segments of the beef industry, except packers, benefited from the higher retail prices. The processor/retailer margin was up 9.4 percent and the price received by cattle feeders was up 7.4 percent, but the packer margin was down more than 18 percent in January to November 2007 compared to these months of 2006. Beef packers have had tight margins most of the time since 2003 when the cow with BSE was found in Canada.

Speaking of BSE, another cow was found with BSE in mid-December in Alberta, Canada. The cow was 13 years old, which means she was 3 years old when the ban on feeding meat and bone meal to cattle went into effect. This one case is not expected to affect Canada’s risk status; therefore, business as usual is expected.

Demand for beef at the U.S. consumer level was very good in 2007, considering the increase in competition from other meats and the high cost of energy. Our index for demand at the consumer level for January to November shows an increase of 0.9 percent from a year earlier.

Demand for live fed cattle continued to show brisk growth with our index showing an increase of 3.4 percent for January to November. Beef exports were the primary factor in the increased demand for live fed cattle in 2006 and 2007.

Beef imports into the U.S. were up 2.2 percent during January-October 2007 compared to a year earlier. Production of beef in the U.S. also increased, but the U.S. remained a net importer of beef. In 2006, our net beef import as a percent of production was 7.6 percent during January-October. During these months of 2007, our net beef import as a percent of production was 6.6 percent.

Cow slaughter during January-November 2007 was up 6.8 percent compared to this period in 2006. This follows an 11.9 percent increase in cow slaughter during these 10 months of 2005 compared to 2006. Comparing 2007 to 2005, cow slaughter increased 19.5 percent.

Feeder cattle prices in late December were modestly above this time a year ago. Steer calves at Oklahoma City weighing 400-500 lbs. were more than $3 per cwt. higher than a year ago, and 700-800 lb. yearling steers were between $5 and $6 per cwt. above a year ago. Fed cattle prices – which are expected to set a new record yearly high in 2007 – were high enough to more than offset the increased feed costs of cattle feeders. Feeder cattle prices are expected to continue high compared to history, but high corn prices will be negative to feeder cattle prices.

Swine
Finals for 2007 hog slaughter are expected to set a new record high of a little over 109 million head, up nearly 4 percent from 2006. An additional 3 percent increase expected in 2008 is bad news for hog producers. Slaughter in 2008 is expected to be between 112 and 113 million head.

Hog prices held up very well in 2007, considering the increase in marketings. The average live price in Iowa/Minnesota for barrows and gilts was about $0.20 per cwt. lower in 2007 than in 2006. However, the average-cost producer who did not forward price his hogs through the futures market saw his profits fall more than $0.20 per cwt. because of higher feed prices. Unfortunately, hog producers will need to contend with high feed prices for the foreseeable future.

Some studies in the last half of 2007 pointed out that not very much of the increase in food or meat prices could be attributed to higher livestock feed prices. This may be true, but as of late 2007 neither hog nor cattle producers had had time to adjust their operations to deal with higher priced corn. But continued higher corn prices will eventually result in higher meat prices. How long it will take is not completely predictable.

With the current structure of the production segment of the hog industry, producers may see red ink for several years before reduced production and, hopefully, increased demand will result in hog prices high enough to provide profits for the average cost producer.

Speaking of increased demand, there was robust growth in live hog demand during the first 11 months of 2007 compared to these months in 2006. Our demand index for live hogs was up 3.2 percent and demand at the consumer level was up 2.3 percent compared to last year. The larger increase in demand for live hogs compared to U.S. consumer demand was largely due to increased pork exports and population growth rather than more pork being consumed per person. Hopefully, demand growth will continue strong enough through 2008 to limit the financial losses of pork producers. Yet consider that our ability to forecast changes in demand for food is practically non-existent.

Retail pork prices were up 2.2 percent during the first 11 months of 2007 compared to a year ago. These higher prices were the result of increased demand for pork rather than reduced supply. All segments of the pork industry benefited from the higher retail pork prices. For the January to November period of 2007, the processor/retailer margin increased 3.3 percent, the packer margin increased 3.4 percent, and the producer’s live hog price was up 0.1 percent. However, for the year, hog prices are expected to be down some on average, but only about $0.20 per cwt. live.

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