The document discusses trends in the US cattle industry from 2009-2010, including declining cattle inventories, rising costs of production, and tight domestic beef supplies. Cattle numbers were at their lowest since 1959. Beef cow inventory declined 1% in 2010 while milk cow numbers dropped 2.7%. Smaller cattle supplies supported higher prices for calves and feeders in 2010. Beef production was forecast to decline 2% from 2009 levels due to smaller feeder cattle availability and cattle placements.

1. Brenda L. Boetel Extension Livestock Marketing Specialist University of Wisconsin-River Falls

3. Current inventory is about 29% smaller than in 1975 Smallest since 1959

4. Total Cattle- 93,700 ---- Down 1% Beef Cows-31,400------- Down 1% Dairy Cows-9,100,000--------Down 3% Beef Heifers-5,400,000-------Down 2% Dairy Heifers-4,5,000------Up 2% Smallest Herd Size 1959 2009 Calf Crop Smallest since 1950

5. High Grain Production Opportunites in Central Plain Drought in South East U.S. 2010-5K decline 260, 000 cow in 2010

6. Who Is Losing the Cows?

7. Annual Calf Crop Projections

8. Production per cow continues to increase More calves weaned-improved health care Feeding industry is developed and efficient-Technology Improve genetics

9. Demand Exchange rate Alternative meats Consumer income Byproduct Value Supply Recent prices and returns Cow slaughter and inventory Weights and beef production Past Prices and Seasonality Outlook

10. Index Tracks Demand Changes But it does not address why demand shifts occurred

11. Early 2009 the value of US dollar relative to other currencies was NOT favorable to US Exports Picture changed throughout year

12. Pork export down in 2009 11.5% from 2008 Pork imports are steady Beef exports down in 2009 1% from 2008 Beef imports up 7.5%

13. Pork production down 2% 2008 2009 up 7% from 04/08 average Slaughter down 2.2% Weights up almost 4 lbs Poultry production steady compared to 2008 Beef production down 2%

14. Real prices of other meats have not changed much over time. Retail featuring is likely. Reported nominal retail prices have worked higher over time but declined when adjusted for inflation

15. Incomes are increasing but expenditures remain weak Savings as a percentage of personal disposable income is increasing Source: Bureau of Economic Analysis

16. Source: Bureau of Economic Analysis

17. Historically, beef demand benefited from Growth in U.S. economy & low savings rate But in ‘09 & ‘10 problem areas are Weak incomes Rising savings rate, which will reduce expenditures Near-term, weak consumer expenditures expected to hold back beef demand

18. In 2008, Byproduct value reached record highs of nearly $12.00 / cwt. Dropped to $5.90 in March ‘09 Recent value was $10.18

19. Value is higher Choice boxes were $ 2.21higher than last week, $25.94 higher than 2009 Selects were $1.88 higher than last week, $25.13 higher than 2009

20. Determined by supply and demand for Choice and for Select meat Supply of choice cattle is down – typical for this time of year Choice supply also down from 2009 Demand for choice meat typically lower this time of year

21. Beef is more affected than any other protein by the economic situation Look for continued weak domestic demand International demand will depend on alternative protein production, value of the dollar, trade restrictions

22. Cow-Calf Production costs rising rapidly Up almost 30% from 2005 Feed costs have helped drive up production costs Record high hay prices are coming down Rising breakevens putting pressure on cow-calf sector Estimated ‘09 breakevens up 39% compared to 2006

23. Cow-Calf Production costs rising rapidly Up almost 30% from 2005 Feed and hay helped drive production costs up

24. Rising Breakevens Putting Pressure on Cow-Calf Sector Estimated ‘09 Breakevens up 39% compared to ‘06

25. Livestock Marketing Information Center Calf prices have been falling while costs have been rising

26. Livestock Marketing Information Center Returns went negative in ‘08 and stayed negative for ‘09

27. Important to be a High Return Producer 2009 Cow-Calf Profits

28. Profitability Differences Years Top 1/3 Total Return $ per head Bottom 1/3 Total Return $ per head 1980-2000 $13.5 Bil $64 -$12.6 Bil -$55 2000-2007 $13.7 Bil $172 $4.3 Bil $54 2003-2007 $9.9 Bil $201 $4.1 Bil $82 1980-2007 $25.8 bil $92 -$8.5 Bil -$27

29. Typically as inventory declines, prices increase Not experienced this the last couple years

30. Average 2009 slaughter price down 11% from 2008 Average 2010 slaughter price up 8% from 2009

31. COF down 3% from 2009 Fed cattle supplies are tight Placements down 1% of 2009 Poor weather and poor projected margins didn’t help Marketings up 2%

32. Total cow slaughter down in 2009 Cow slaughter as % of cow inventory up Increase in % came from dairy sector

33. 40% of the U.S. Beef Cow Herd Resided in Severe Drought Areas in 2009

35. 2009 Slaughter cow prices down 10% from 04/08 average Last week prices up 23% over 2009

36. Beef Cow Inventory Declining Jan 1, 2010 inventory down 1.4% vs. 2009 Milk cow numbers down 2.7% Slaughter declines expected for ‘10

37. Beef replacement heifers down 1.7% from 2009 Dairy replacement heifers up 2.5% from 2009

38. Where Are Herds Expanding

39. Calf crop 1% smaller than 2008 Smallest since 1950 Smaller supply of feeder cattle outside feedyards Cattle feeders will likely have competition for getting those calves placed Likely result in excess capacity in feedyards

40. Smaller numbers of COF Smaller numbers of cattle to place on feed Means 2.6% decline in slaughter numbers Dressed weights are increasing by 0.7%

41. Beef production is forecast to be 2% lower than 2009

42. Smaller Domestic Beef Supplies Lie Ahead Total meat supplies will be very tight by 2011 Declines in consumption by 1.7% Weak demand is still a problem

43. Smaller cattle supplies have supported calf and feeder cattle prices Lower corn prices have supported prices, particularly calf prices Weak domestic but improving international demand Higher byproduct prices

44. Short-term Placement weights were up – typically implies higher finishing weights Longer-term Feeder cattle and calf supply are very small Beef production is expected to be up down by 0.9% in Q1 and down 3.4% for Q2 in 2010 Beef production is expected to be down 2% from 2009 in 2010

45. Market Timing Highs and Lows A $10 spread on a 1400 lbs cow is $140 Marketing of Cows Represents 15-20% of Income in Cow-Calf Operation

47. Among the “places to save” responses included : Reduce hay, stay on range Sell cows above 1350 lbs. 3. Postpone capital expenditures – rent and hire machines rather than own, 4. Earlier pregnacy testing and selling, 5. Cut fertilizer cost by using more clovers, 6. Streamline mineral program; Reduce phosphorus 7.Sort by Body Condition Score and feed accordingly, 8.Sell more heifers rather than keep replacements 8.Graze more cattle on stockpiled feed 9. Question everything

48. Where did these producers think were the places to spend money in their operations this year? Responses included : Protein, mineral and vaccines, Testing and monitoring – PI calves, soils, feedstuffs and range Continuing education Spend time and money on maintenance and extend life expectancy of equipment Animal ID Keep good ranch help Pasture renovation In synthesizing the responses, Paterson says he thinks the top five important places to cut costs are : Cut hay waste Feed more crop residue such as straw Weigh and sort cows Body condition score and sort the herd Supplement wisely based on forage analysis

49. The five places Paterson believes are worthy to spend this year include: 1. Mineral supplementation, specifically phosphorus, copper, zinc and selenium, 2. Forage analysis 3. Preg testing 4. Implants/ionophores 5. Herd biosecurity He concludes: It will be important for producers to balance rations, remember that health and nutrition go together, use straw in rations, price supplements based on both nutrient and non-nutrient costs, and know the weight of your cows

50. Below average annual cow costs Lower than average calf breakeven prices Lower feed cost Lower interest expenses (less debt) Lower general operating expenses Higher averaging weaning weights Higher conception rates More pound weaned per cow exposed High quality bulls with strong genetics Preventative herd health plans High quality pastures (maintain nutritional requirements of the cow)

51. Live cattle (IA-MN market) Q1 2010 $86-88 Q2 2010 $87-90 Q3 2010 $83-87 Q4 2010 $86-89 Feeder Cattle 700-800# Southern Plains Q1 2010 $99-101 Q2 2010 $100-103 Q3 2010 $102-108 Q4 2010 $99-107 Feeder Cattle 500-600# Southern Plains Q1 2010 $115-117 Q2 2010 $117-121 Q3 2010 $117-123 Q4 2010 $109-118

52. Cattle Inventories Have Flattened Corn Prices are Affecting Production Costs Beef Prices Are Moving Up Heifer Retention is lower by 2% Higher Feeder Calf Prices Expected Profitable Situation For Cow-calf Producers and feedlot owners Cattle Slaughter Weights Will Go Up Price Increases Tied to Asian Export Markets Reopening but Premium Market Competitive Meat Prices will go UP as inventory declines

53. Any Questions? [email_address] Graphs: LMIC – www.lmic.info Data: LMIC, USDA-NASS