Livestock Report
By Glenn Grimes

Cattle
Cow slaughter in 2007 through the last week of September was up 7.9 percent from this period in 2006.
Dry weather in the West and Southwest in 2006 and in the Southeast in 2007 stopped the build-up in the cow herd that had started in 2004. Through 2004 and 2005, the cow herd increased at a slow rate but during 2006 it declined 0.1 percent. The male-to-female slaughter ratio was down from 1.28 males per female in August 2006 to a ratio of 1.22 in August 2007. This change supports other indications that a slight reduction in the cow herd has occurred and is nearer the 10-year average break-even ratio of 1.17.
On July 1, 2007, the total North American cattle herd was only slightly smaller than a year earlier. Both the total cattle herd and the cow herd were down 0.4 percent from 12 months earlier.
The 2007 U.S. calf crop is expected to be down slightly from a year earlier. The 2008 calf crop in the United States and Canada is likely to be close to 2007. Therefore, beef supplies are not likely to change much during the next couple of years.
Demand for beef and live cattle is likely to be the driving force for cattle prices during the next 2 years. January-to-August 2007 demand for beef at the U.S. consumer level was up 0.8 percent from the same months of 2006. Consumer demand for most other meats in the complex was also up during this period. Pork demand was up 1.9 percent and turkey demand was up 3.2 percent. Only demand for broilers was down. The good news for cattle producers continues to be the demand for live fed cattle, which was up 3.8 percent for the first 8 months of 2007 compared to these months of 2006.
U.S. beef exports for January to July were up 25.7 percent compared to these 7 months in 2006. Beef exports to Japan were up sharply percentage wise but were still quite small in total tonnage. Beef exports to other countries during this period were up 37 percent to Canada; down 12.8 percent to Mexico; up 8.8 percent to the Caribbean; and up 114.1 percent to other countries.
The increase in beef exports plus growth in domestic demand for beef are what fueled the 3.8 percent increase in our demand index for live fed cattle.
The United States imported 3.2 percent more beef during the first 7 months of 2007 than 2006. However, our net beef import as a percentage of U.S. production declined from 8.4 percent in 2006 to 7.7 percent in 2007.
Live cattle imports from Mexico were down 17.9 percent in January to July 2007, but live cattle imports from Canada were up 17.3 percent compared to these months in 2006. Total live cattle imports were down 2.2 percent during this period.
Even with a record corn crop in 2007, the price of corn is likely to be close to a year ago through spring 2008. Corn prices are not likely to fall low enough to lose too many corn acres to soybeans in 2008. Therefore, both corn and bean prices are likely to stay at historic highs for some time.
Feeder cattle prices are expected to follow the seasonal decline in calf prices but stay high compared to history.

Swine
The September Hogs & Pigs report continued to show slow growth in the hog herd. The breeding herd was up 1.1 percent, the market herd was up 2.9 percent, and the total herd was up 2.8 percent.
The data indicates fourth-quarter slaughter will be a record high at near 29.2 million head. Included in this total is an estimated slaughter in excess of 10 million head in October. A kill of 10 million head in a month would be a first for the United States. With this large slaughter, hog prices will put average cost producers in the red if they did not forward price animals for both the first and second quarters of 2008.
More bad news is that total pork production in 2008 is expected to be larger than in 2007 and feed grain prices are expected to remain high. Without substantial growth in demand for pork and hogs, the average cost producer could experience substantial red ink next year.
The big unanswered question is how quickly producers will react to losses. Will hog producers who also produce corn conclude that they can meet their income goals by selling $3.50 per bushel corn instead of hogs? If enough do this, downsizing of the herd may happen fairly quickly. However, we expect herd reduction to be slow and the average-cost producer will see the red ink flow for some time unless demand for hogs increases enough to bail them out of their difficult situation.
Even with a 13.3 billion bushel corn crop in 2007, corn prices are expected to average above $3 a bushel into the spring of 2008. The increasing demand for corn is expected to push corn prices high enough to keep farmers from switching too many corn acres to soybeans in 2008. Therefore, both corn and bean prices are likely to stay at historical highs for some time.
Our demand index for pork at the retail level for January to August 2007 was up 1.9 percent. And, better still, demand for live hogs was up 3.3 percent for these 7 months compared to a year earlier. Most of the growth in demand for live hogs appears to have resulted from increased domestic demand for pork. Most of the increase in retail pork prices was bid through to live hog prices. Retail pork prices for January to August were up 2.3 percent. The total marketing margin for this period was only up 1.3 percent but live hog prices were up 5.8 percent.

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