Livestock Report
By Glenn Grimes

Cattle
Total cow slaughter for 2007 through the week ending June 16 was up 13.9 percent. Dairy cow slaughter was up 12.7 percent and beef cow slaughter was up 14.9 percent. These larger cow slaughter levels are strong evidence that producers are not building the breeding herd and may be reducing the herd at a relatively slow rate.

The drought in Texas and Oklahoma has broken but the southeastern states are very dry. For the week ending June 23, 66.2 percent of the pasture in Alabama, Florida, Georgia, Kentucky, Mississippi and Tennessee was rated poor to very poor.

Consumer demand for all meats with the exception of broilers was up a little in the first 5 months of 2007. In January to May, beef demand was up 1.1 percent, pork was up 0.6 percent, and turkey was up 3.8 percent but broiler demand was down 3.5 percent. Is it possible people are finally satiated with chicken?

Demand for both live fed cattle and live hogs showed growth for the first 5 months of 2007. Demand for live fed cattle was up 4.7 percent and for live hogs up 3.8 percent.

In June, live fed cattle prices came under strong downward pressure from relatively large supplies. By the end of August, fed cattle prices should be at their summer low.

Feeder cattle prices have held quite strong considering the $3-plus per bushel corn prices.

Cattle producers received good news on June 29. USDA reported producers had planted 92.9 million acres of corn, up 19 percent from 2006. Much of the increased corn acreage came from soybeans. According to the June 29 report, soybeans acreage was down 15 percent from last year at 64.1 million acres.

With a near normal corn yield in 2007, corn prices for the first half of 2008 may not be as high as a year earlier. On the day following the release of the acreage report, corn futures prices were down with a range in the futures closing price of $3.64 to $3.95 per bushel. Soybean prices are expected to be quite high in 2008 as the soybean industry competes with the corn industry for acres.

U.S. beef exports for January to April 2007 were up 19.1 percent from a year ago but were still down 52 percent from the same period in 2003, which was before the cow was found with BSE in Washington state. Beef exports to Japan during the first 4 months of 2007 were up sharply percentage-wise but the quantity of beef was still quite small. Beef imports for January to April were down 1.4 percent from 2006. Net beef imports for the first 4 months of 2007 declined from 9.59 percent of production to 8.45 percent. This decline in net beef imports is one of the major reasons our demand index showed stronger demand for live fed cattle.

Live feeder cattle imports from Mexico for the January to April period were down 21.4 percent from a year earlier. Cattle imports from Canada were up 9 percent from 2006 but total live cattle imports for the first 4 months of 2007 were down 7.1 percent from a year earlier.


Swine
USDA’s June 1 Hogs and Pigs report continued to show a slow increase in herd size. The breeding herd was up 0.9 percent, the market herd was up 1.8 percent, and the total herd was up 1.7 percent from June 1, 2006.

Even though slaughter weights were down during most of the months between June 2006 and June 2007, productivity growth per animal in the breeding herd continued to increase at a slow rate. As of June 2007, average litter size had been above year-earlier levels for 15 consecutive quarters. The average litter size for March to May 2007 at 9.15 pigs was the largest of record.

Productivity growth has been driven, in part, by changes in the structure of the pork industry toward more concentrated production. Based on a study completed in June, 26 hog firms produced 43 percent of the U.S. hogs slaughtered in 2006. Another 165 firms produced 21 percent of the U.S. hogs slaughtered in 2006.

Hog production has been very profitable during the last 3 years with most producers reporting profits in all 3 years. As a result, all sizes of producers in our study reported plans to increase production in 2007 over 2006 and to continue increasing production through 2009.

With the big increase expected in feed prices, producers on average will lose money in the next few years unless live hog prices improve. To get improved prices, live hog demand will need to increase substantially or, more likely, hog production will need to be reduced.

We are expecting hog slaughter for the remainder of 2007 to run somewhat above the level indicated by the inventories in USDA’s June 1 Hogs and Pigs report. Slaughter in recent quarters has run above expectations based on USDA’s inventories. In the April to June quarter, slaughter was 2 percent larger than expected based on the March inventories. Also, we expect some larger marketings during the remainder of 2007 because of less death loss due to circovirus since more circovirus vaccine has become available. Therefore, strong live hog demand will be required to keep hogs profitable for the average cost producer in the fourth quarter of 2007.

Our demand index for live hogs and live cattle showed good growth in the first 5 months of 2007. Live hog demand was up 3.8 percent from last year and live fed cattle demand was up 4.7 percent. The increase in our demand index was a result of higher retail pork prices and narrower marketing margins.

Pork exports for April 2007 were down 12.4 percent from a year ago. This may be the year we stop year-over-year increases in pork exports.

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