1. 1 K-State Research & Extension Livestock Outlook James Mintert, Ph.D. Professor & Extension State Leader Department of Agricultural Economics Kansas State University www.agmanager.info/livestock/marketing jmintert@ksu.edu

2. 2 K-State Research & Extension A Shrinking Industry Responding to a Lack of Profitability Current inventory is about 26% smaller than in 1975

3. 3 K-State Research & Extension Rising Productivity Is Partially Responsible

4. 4 K-State Research & Extension But Weaker Demand Was Key Beef Demand 1980-1998

5. 5 K-State Research & Extension Measuring Changes In Beef Demand 1998-2004 Demand in 04 Was Up About 25% from 1998 Level

6. 6 K-State Research & Extension Measuring Changes In Beef Demand 1998-2005 Beef Demand During All of 05 Decreased About 4% But Demand in 05 Was Still Up About 21% from 1998 Level

7. 7 K-State Research & Extension 2 nd Quarter Demand Index Fell About 10% Below A Year Ago

8. 8 K-State Research & Extension Beef Demand Shifters Whats been taking place recently? Low carb diet effect has worn offLow carb diet effect has worn off Consumers disposable income growth slowingConsumers disposable income growth slowing Expect more domestic demand weaknessExpect more domestic demand weakness How do we turn this around?How do we turn this around?

9. 9 K-State Research & Extension International Trade Outlook

10. 10 K-State Research & Extension U.S. Was A Net Exporter From 1981-2003

11. 11 K-State Research & Extension Top 5 Importers Accounted for 91% of U.S. Exports U.S. needs to recapture these markets to regain $s and volume

12. 12 K-State Research & Extension Cattle Imports from Canada Are Increasing But Remain Well Below 2002s Record Level Jan-July 2006 imports 32% below 2002s and 21% below 2001s

13. 13 K-State Research & Extension Beef Imports From Canada Decline

14. 14 K-State Research & Extension Result: U.S. Imports Falling Below 2005s

15. 15 K-State Research & Extension Where Are We Headed? Trade U.S. strength is in high quality beef productsU.S. strength is in high quality beef products Other countries may have comparative advantage in cow-calf productionOther countries may have comparative advantage in cow-calf production Exports to Pacific Rim increasing in 07Exports to Pacific Rim increasing in 07 Regaining market share will take several yearsRegaining market share will take several years –Market access is key Consumer incomes in importing countries are key to long-run growth in exportsConsumer incomes in importing countries are key to long-run growth in exports

16. 16 K-State Research & Extension Long, Slow Road to Export Recovery

17. 17 K-State Research & Extension Export Recovery Means Net Beef Imports in 2007 Could Be 1/2 2004s

18. 18 K-State Research & Extension Supply Side in the U.S.

19. 19 K-State Research & Extension Mid-Year Inventory Was Above 2005s, And…

20. 20 K-State Research & Extension Strong Profitability Encouraging Expansion, But…

21. 21 K-State Research & Extension Livestock Marketing Information Center Data Source: USDA/NASS Poor Pasture Conditions Could Be Holding Back Expansion

22. 22 K-State Research & Extension U.S. Beef Cow Slaughter Up 17% vs. 2005

23. 23 K-State Research & Extension Slaughter Is Expected To Rise Modestly

24. 24 K-State Research & Extension Large On Feed Inventory

25. 25 K-State Research & Extension Drought Pushing Light Weight Placements Up

26. 26 K-State Research & Extension Weights Will Remain Heavy

27. 27 K-State Research & Extension And Beef Production Will Rise Cyclically

28. 28 K-State Research & Extension Sharp Price Recovery from Summer Lows

29. 29 K-State Research & Extension Futures Are Pretty Optimistic For Spring

30. 30 K-State Research & Extension Prices Could Wind Up Record High Again in 06 Prices Could Wind Up Record High Again in 06

31. 31 K-State Research & Extension Despite Feedlot Losses, Feeders Remain Optimistic

32. 32 K-State Research & Extension But Higher Corn Prices Lead To Lower Bids for Feeders

33. 33 K-State Research & Extension Feeders In 05 Averaged A Record High of $112/cwt. Prices in 06 Could Wind Up Near 05s Average

34. 34 K-State Research & Extension Rising Corn Prices Pushing Prices Lower

35. 35 K-State Research & Extension Near Record High Calf Prices Again In 06 Cycle Peak in 05 & 06

36. 36 K-State Research & Extension Ethanol, Corn Prices, & Cattle

37. 37 K-State Research & Extension 3 Largest Corn Crops On Record

38. 38 K-State Research & Extension But Corn Usage Has Been Growing Rapidly

39. 39 K-State Research & Extension Ethanol Usage Growing Rapidly

40. 40 K-State Research & Extension U.S. Will Need More Corn Acres How Do We Get Them?

41. 41 K-State Research & Extension It Will Take Higher Prices To Push Acreage Higher Average Prices Will Be Higher and Frequency of Price Spikes Could Increase

42. 42 K-State Research & Extension Where Are Corn Prices Headed? Higher Corn Prices Spell Trouble for Livestock Producers Ethanol?

43. 43 K-State Research & Extension Hog Outlook

44. 44 K-State Research & Extension Iowa Farrow to Finish Profits, 1965-2005 Source: John Lawrence, Iowa State University 1965-74: $10.04/head profit 1975-84: $14.22/head profit 1985-94: $10.51/head profit 1995-04: $ 0.52/head loss

45. 45 K-State Research & Extension Iowa Farrow to Finish Profits, 1994-2006 Source: Iowa State University 32 consecutive months of profit, longest since 33 months in 1976-79

46. 46 K-State Research & Extension Surprisingly Slow Growth in Slaughter

47. 47 K-State Research & Extension Pork Production Expected To Rise Next Several Years

48. 48 K-State Research & Extension But Export Growth Has Been Phenomenal

49. 49 K-State Research & Extension Prices Headed Lower in 2007

50. www.agmanager.info/livestock/marketing