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LIVESTOCK REPORT
By Glenn Grimes
CATTLE
Demand for beef at the consumer level continues to show weakness with the preliminary data for January to July showing a loss in our demand index of 4.4 percent from a year earlier. Demand for pork and broilers at the consumer level was also down for these 7 months compared to the same months a year ago. Our demand index for pork was down 5.4 percent and for broilers was down 7.1 percent.
The good news is that fed-cattle demand was up 3.5 percent for January to July compared to this period in 2005. Beef production in the United States was up 7 percent for January to July, but per capita consumption was up only about 1.4 percent. Most of the difference between beef production and per capita consumption can be explained by the larger amount of beef exported and the smaller amount imported. United States beef exports for January through June were up 68.7 percent in 2006 compared to 2005.
Beef imports for January to June 2006 were down 13.9 percent compared to this period in 2005. Feeder cattle imports from Mexico were down 5 percent during the first 6 months of 2006 compared to a year ago, but total live cattle imports into the United States were up 72.2 percent. Remember, our border was closed to live cattle from Canada during the first 6 months of 2005.
Cow slaughter continues to run above a year ago. Through the week ending Aug. 19, total cow slaughter for 2006 was 7.9 percent above this period of 2005. Dairy cow slaughter was up 1.8 percent and beef cow slaughter was up 15 percent. For the 4-week period ending Aug. 12, total cow slaughter was up 24.2 percent compared to a year ago with dairy cow slaughter up 10.3 percent and beef cow slaughter up 37.1 percent.
The odds appear high for the buildup in the beef cow breeding herd to end this year. There is a fairly high probability that beef cow inventory will be down some on Jan. 1, 2007, compared to Jan. 1 this year. The dry weather this year in a substantial portion of beef-cow country is the major reason for the reversal. Prices for feeder cattle are certainly at levels that make beef cow/calf operations about as profitable as they have ever been.
SWINE
Consumer demand for pork continues to be weak. For January to July, our demand index for pork at the consumer level was down 5.4 percent from this period a year ago. For the 3-month period of May to July, consumer demand for pork was down 5.1 percent—somewhat better but not great.
Our live hog demand index for January to July was down 1 percent using preliminary data. However, this 1 percent loss amounted to less than 8 percent of the gain achieved during the first 7 months of 2004 and 2005. The great news is that in May to July live-hog demand was up 1.6 percent compared to last year and up 0.5 percent from the spectacular year of 2004.
Why did live hog demand fall less than consumer demand? A substantial portion of the difference can be explained by the influence of increased pork exports on our demand index for live hogs. Pork exports for January through June 2006 were up nearly 44 percent from these months in 2004. Population growth in the United States also contributed to the growth in live hog demand, but it is not a factor in the consumer demand index. Some of the difference also can be explained by the increase in hog slaughter capacity due to the Triumph hog slaughter plant in St. Joseph coming on stream in late 2005. This would have a negative impact on our consumer demand index but would be positive for the demand for live hogs.
Unless the strong live-hog demand evaporates or slaughter is much larger than expected, we are going to set a new record this fall for consecutive months when average-cost hog producers make a profit. As of August 2006, we are at 31 months and still counting. The record is 33 consecutive months.
Pork exports for January to June were up 15.2 percent from a year ago. Pork exports for the first 6 months of this year were 80 percent above the same period in 2003. This is a spectacular run and is forecast to continue through 2007.
Exports have grown in 2006 without the help of our largest customer, Japan. Japan’s purchases during January to June this year fell 8.2 percent below these months in 2005. Purchases increased in other exports markets.
United States pork imports for January to June were up 1.5 percent from 2005. Live hog imports from Canada were up 9.7 percent. Canadian feeder pig imports increased 13.5 percent and slaughter hogs 1.6 percent.
Pork production is expected to continue to grow slowly through 2006 and 2007. If this expectation comes true, it means we’ve put together 6 consecutive years of record pork production.
Even though the U.S. hog price cycle seems to be intact, the production cycle may be a thing of the past. From 2000 through 2005, we had 5 years of growth in pork production with 4 years at record levels. In 2005, production was up 9.2 percent compared to 2000. During this 68-month period of production growth, the average-cost producer had
45 months of profit according to Iowa State University data.
Hog producers can take part of the credit for making these 45 months profitable, but increased demand for live hogs was also a factor. Growth in pork exports from the first half of 2000 to the first half of 2006 was 141 percent. High-protein diets also were important and contributed to the growth in demand for live hogs and pork in 2004.
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