Livestock report by Glenn grimes
Beef
The slowdown in beef cow slaughter early in 2007 is believed to be due to good rainfall this spring in the parts of beef cow country that were dry in 2006. The increase in beef cow slaughter in late April and early May probably was due to the current drought in the southeastern states. These data say the odds are quite high that producers are still reducing the size of the beef cowherd.
Demand for beef at the consumer level for January to April was up 0.2 percent from 12 months earlier according to our demand index calculations. Demand for live fed cattle was up 3.9 percent for the first 4 months of 2007 compared to 12 months ago. The stronger demand for live fed cattle than U.S. consumer demand for beef is mainly due to exports. For the January to March period, net beef imports as a percent of U.S. beef production declined from 10.2 percent in 2006 to 8.04 percent in 2007.
Retail beef prices for January to April were up 1.9 percent from this period in 2006. The total marketing margin for the first 4 months of 2007 was only 0.2 percent larger than these months last year. The packer margin was 9 percent larger, but the processor/retail margin was 1.7 percent less than a year ago. This indicates most of the increase in beef prices was bid through to cattle feeders bringing fed cattle prices up 5.2 percent in January to April compared to last year.
Demand for all red meats for the first 4 months of 2007 was about flat with a year ago. Pork was down 0.2 percent and beef was up 0.2 percent at the consumer level. However, live cattle and live hog demand remained quite robust with live hog demand up 3.7 percent and live fed cattle demand up 3.9 percent. With the record supplies of red meat, this strong demand could not have been better timed.
The number of cattle on feed May 1 in feedlots with 1,000 head or more capacity was down 2.3 percent from a year earlier. This was the fourth consecutive month that the number of cattle on feed was below a year earlier. The number of steers on feed April 1 was down 4 percent from 2006 and the number of heifers was up 4 percent from a year ago. This is another signal that cow/calf producers will probably reduce the size of the cow herd again in 2007.
Feeder cattle prices continue quite strong even with the high price of corn. In late May, 400 to 500 lb. calves were selling for $127.50 to $139 per cwt. at Oklahoma City, about the same as a year ago when they were $125.50 to $141 per cwt. Yearlings weighing 700 to 800 lbs. were slightly higher in late May this year than last at $107.50 to $113.85 for the week ending May 26, 2007. Feeder cattle prices will likely weaken some as we move through the summer of 2007.
Hogs
Good news from the north! Canada continues to reduce their hog breeding herd, but at a slow pace. On April 1, Canada’s breeding herd was down 1.6 percent from this date in 2006. Canada’s market herd was down 3.3 percent and their total herd was down 3.1 percent from this time last year. The reason for the larger decline in their market herd than their breeding herd was the larger number of feeder pigs exported to the United States.
U.S. pork exports were below a year earlier in March, the second consecutive month of decline. However, our total exports of pork for January to March were still 2.8 percent above a year earlier.
Our net export of pork for January to March at 10.23 percent of production was up 0.69 percent from these months of 2006. This growth in net pork export was due to both more exports and less imports. Imports were down 7.7 percent.
Live hog imports in January to March were up 7.9 percent from Canada, with feeder pigs up 6.4 percent and slaughter hogs up 11.4 percent compared to this period in 2006.
Retail pork prices for January to April were up 1.1 percent compared to a year ago while the producer’s price for live hogs grew 10.2 percent. The increase in the producer’s price was due to both higher retail prices and narrower marketing margins. The total marketing margin was 2 percent smaller than this period in 2006, with the processor-retail margin 3.3 percent smaller but the packer margin 3.8 percent larger.
For January to April, 2007 pork production was up 2.2 percent and live hog prices were up 10.2 percent. Stronger demand is the only explanation for this, but the reason for this much growth in live hog demand is impossible to explain completely.
Based on research by the University of Missouri and Iowa State University, U.S. hog production continues to become more concentrated. Based on this study, 27 pork producers in the U.S. produced 43 percent of U.S. hogs in 2006. Another 164 producers produced 21 percent of the hogs. The largest 2.9 percent of all hog producers in the U.S. produced 85 percent of the hogs in the U.S. last year. All producer size groups in the study planned to increase production from 2006 to 2007 and continue to increase production through 2009.
Unless the current remarkable demand growth continues through the next 3 years, these increases in production will not occur. With $3+ per bushel corn prices, demand will need to increase between 2 and 3 percent a year just to maintain the size of the current herd through 2009.
We expect cash hog prices to continue strong through August if the current growth rate in demand can be maintained. However, the average-cost producer will likely lose money in the fourth quarter of 2007 even with a trend line corn yield this year.
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