Livestock report
By Glenn Grimes

Cattle
Fed cattle prices for the year 2006 averaged 2.2 percent below 2005. Fed cattle prices would have been pressed lower if marketing margins had not been 3.5 percent smaller than in 2005. The wholesale/retail margin was 7.7 percent smaller, but the packer margin increased 18.3 percent. The packer margin needed to increase in 2006 because packers had been in the red a substantial part of the time since the cow with BSE was found in Canada.

Demand for beef for the year 2006 was down 4.4 percent based on preliminary data. Demand for pork was also down 4.5 percent and broiler demand was down 7.7 percent.
 
Have we finally found out what level of meat consumption is needed to avoid stress on the meat production industry? The first 5 years of the 1980s showed declines in demand for beef, pork, broilers and turkeys. Even though some people have speculated for 20 years that U.S. consumers are about saturated with meats, I am not yet ready to believe that the meat industry will need to reduce total meat supplies because of reduced consumer demand.

I do believe that sharply higher corn prices will increase the cost of producing meat enough that total per capita meat supplies will be reduced. Producers will eventually adjust their operations to cover the cost of production and remain profitable.

As expected, the 2006 drought in much of cattle country caused producers to nearly stop the buildup in the cattle herd. During 2005, the U.S. cattle herd increased by 1.7 percent, but during 2006 growth slowed to 0.3 percent. The total cow herd grew nearly 1 percent during 2005 but declined 0.1 percent during 2006. The beef cow herd declined 0.3 percent during 2006 but the dairy cow herd grew 0.7 percent.

Even with the sharp decline in feeder cattle prices in late 2006 because of near $4 cash corn prices in the Midwest, feeder cattle prices have been high enough at least to maintain the beef cow herd with normal forage production.

The 2006 calf crop was a few thousand head smaller than a year ago. However, due to smaller placements of cattle on feed during late 2006, the supply of young cattle outside feedlots on Jan. 1 was up 0.8 percent from a year ago, not counting heifers held for breeding herd replacements.

The total number of cattle operations in the U.S. declined 1.1 percent during 2006. Between 1990 and 2006, the number of cattle operations declined more than 24 percent. The number of cattle operations raising beef cows declined 1 percent between Jan. 1, 2005 and 2006. Between 1990 and 2006, the number of beef cow operations declined 17 percent.

Pork
The U.S. has gone from being a net importer of nearly 8 percent of pork production in 1987 to being a net exporter of nearly 10 percent of production in 2006. The U.S. hog herd was probably about 18 percent larger in 2006 than it would have been without the change in trade during the last 19 years.

Retail pork prices were 0.6 percent lower in December 2005 than in December 2006. For the year, 2006 retail pork prices averaged 0.7 percent below a year earlier. Live hog prices for 2006 averaged 5.5 percent below a year earlier. Consumers benefited from the lower retail prices and marketers benefited from the lower live hog prices. The total marketing margin for pork was 1.4 percent larger in 2006 than 2005. The wholesale/retail margin was 1 percent larger and the packer margin was 3.3 percent larger based on USDA data.

Our demand index for pork was down 4.5 percent in 2006 compared to 2005. The good news continues to be the increased demand for live hogs, which was up 0.1 percent over 2005. During the last 3 months of 2006, pork demand was down only 0.8 percent compared to these months in 2005, and live hog demand was up 1.3 percent.

Consumer demand for other major meats also declined in 2006. Beef demand was down 4.4 percent and broiler demand was down 7.7 percent based on preliminary data. This is not the first time demand for all major meats has decreased. During the first 5 years of the 1980s, demand for pork, beef, broilers and turkey declined.

Live hog weights in Iowa-Minnesota have been below a year earlier for the 19 consecutive weeks ending Feb. 3. Weights for the week ending February 3 averaged 267 pounds. In 2005, live hogs were not this light until May. The major reason for these lighter weights was the high price of corn.

Gilt and sow slaughter during late December and January was at a level that has not resulted in reductions in the breeding herd in the past. We believe the odds are high that the U.S. hog herd will need to be reduced at least 5 percent, and maybe as much as 10 percent or more in the next few years for producers to cover higher feed costs and make the necessary profit to stay in business.

The number of hog operations in the U.S. declined 2.6 percent between Dec. 1, 2005, and Dec.1, 2006. When grouped by size of operation, the number of operations with less than 2,000 head in inventory declined. In Missouri, the total number of hog operations declined by 9.1 percent between 2005 and 2006. When sorted by size of operation, the only operations that increased in number in Missouri were those with an inventory of 5,000 head or more.

The number of U.S. operations that owned hogs declined 3.2 percent between Dec. 1, 2005 and Dec. 1, 2006, according to USDA data.

Even though the number of operations and owners declined, the size of the U.S. hog herd continued to increase between 2005 and 2006. 

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