1 K-State Research & Extension Livestock Outlook James Mintert, Ph.D. Professor & Extension State Leader Department of Agricultural Economics Kansas State University

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

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

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

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

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

7 K-State Research & Extension 1 st Quarter Demand Index Fell About 5% Below A Year Ago

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

9 K-State Research & Extension Where Are We Headed? Beef Demand Short run gains from low-carb diets behind usShort run gains from low-carb diets behind us Near term, look for weaker domestic demandNear term, look for weaker domestic demand To stop the decline industry needs to innovateTo stop the decline industry needs to innovate Opportunities abound for innovatorsOpportunities abound for innovators

10 K-State Research & Extension International Trade Outlook

11 K-State Research & Extension U.S. Has Been A Net Exporter Since 1981

12 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

13 K-State Research & Extension Cattle Imports from Canada Are Increasing But Remain Well Below 2002s Record Level Jan-June 2006 imports 28% below 2002s and 15% below 2001s

14 K-State Research & Extension Beef Imports From Canada Decline

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

16 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 Regaining export markets could take yearsRegaining export markets could take years 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 Other countries may have comparative advantage in cow-calf productionOther countries may have comparative advantage in cow-calf production

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

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

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

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

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

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

23 K-State Research & Extension U.S. Beef Cow Slaughter Up 13% vs. 2005

24 K-State Research & Extension But Female Slaughter Still Low

25 K-State Research & Extension Through July, Still Looks Like Modest Expansion Underway

26 K-State Research & Extension Slaughter Is Expected To Rise

27 K-State Research & Extension Large On Feed Inventory

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

29 K-State Research & Extension Weights Will Remain Heavy

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

31 K-State Research & Extension Summer Lows Are Behind Us

32 K-State Research & Extension Futures Are Pretty Optimistic For Fall

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

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

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

36 K-State Research & Extension Cattle Feeders Have Pushed Prices Back Up

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

38 K-State Research & Extension Counter-Seasonal Price Path in Spring 06

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

40 K-State Research & Extension What About 2007? Slaughter cattle prices in high $80s during Q1 & Q2 07 Feeder prices averaging about $110 - $112/cwt

41 K-State Research & Extension Iowa Farrow to Finish Profits, Source: John Lawrence, Iowa State University : $10.04/head profit : $14.22/head profit : $10.51/head profit : $ 0.52/head loss

42 K-State Research & Extension Iowa Farrow to Finish Profits, Source: John Lawrence, Iowa State University 29 consecutive months of profit, longest since 33 months in

43 K-State Research & Extension Surprisingly Slow Growth in Slaughter

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

45 K-State Research & Extension Export Growth Has Been Phenomenal

46 K-State Research & Extension National Weighted Avg. Hog Prices Negotiated Base Price Per Carcass Hundredweight 2005* 2005* Qtr 1 $67.15$56.39$57-61 Qtr 2 $68.18$63.47$60-64 Qtr 3 $66.20$62-64 Qtr 4 $59.83$57-60 Year$66.96$58-61$54-58