1. 1 Cattle Outlook 2011 and Beyond Shane Ellis Extension Livestock Economist Iowa State University August 16, 2011

2. 2 Beef Situation Extremely volatile cattle prices Demand and the economy Exports up Industry still in retraction, cow herd declining Beef production to decline slightly in 2011 More COF, fewer placements in 4 th quarter Profit outlook had been mixed, but remains tight

3. 3 Beef Supply Summary 2010 Total Beef Production: +1.3% Total Slght +2.7%, wts -1.4% 2011 Total Beef Production: -0.6% Total Slght -1.4%, wts +0.9% 2012 Total Beef Production -3.8%

4. 4 January 2011 Cattle Report Million head Change from 2010 All cattle92.6-1.4% Beef cows30.9-1.6% Beef replacement heifers5.2- 5.4% Milk cows9.1+0.7% Milk replacement heifers4.6+0.7% Other heifers9.8+0.5% 2010 Calf crop35.7- 0.7% Cattle on Feed14.0+2.8%

5. 5 July 2011 Cattle Report Million head Change from 2010 All cattle100.0-1% Beef cows31.4-1% Beef replacement heifers4.2- 5% Milk cows9.2+1% Milk replacement heifers4.2+4% Other heifers7.6-2% 2011 Calf crop35.5- 1% Cattle on Feed12.2+3%

6. 6 Livestock Marketing Information Center Data Source: USDA-NASS

7. 7 BEEF COWS THAT HAVE CALVED JANUARY 1, 2011 (1000 Head) Alaska Hawaii US Total Livestock Marketing Information Center Data Source: USDA/NASS

8. 8 CHANGE IN BEEF COW NUMBERS JANUARY 1, 2002 TO JANUARY 1, 2011 (1000 Head) Alaska Hawaii US Total Livestock Marketing Information Center Data Source: USDA/NASS

9. 9 Building the Cow Herd Location Resources Capital Producer Interest (i.e. enthusiasm, youth) Profitable Outlook

10. 10 Livestock Marketing Information Center Data Source: USDA-AMS & USDA-NASS, Compiled & Analysis by LMIC

11. 11 Data Source: USDA-NASS, Compiled and Forecasts by LMIC Yr/yr % Prd & Con 1.3 & -2.5 -0.6 & -2.8 -3.8 & -2.4

12. 12 July Cattle on feed up 4% 10.5 million Aug Cattle on feed up 6-8% Record placements?

13. 13 Cattle Price & Beef Demand Fed cattle prices up 10+% Feeder cattle prices up 20+% Domestic & foreign demand strong Consumer preferences, steak vs. ground Tight choice-select spread

14. 14 Livestock Marketing Information Center Data Source: USDA-AMS

15. 15 Livestock Marketing Information Center Data Source: USDA-AMS, Compiled & Analysis by LMIC

16. 16 Livestock Marketing Information Center Data Source: USDA-AMS, Compiled & Analysis by LMIC

17. 17 Livestock Marketing Information Center Data Source: USDA-AMS

18. 18 Livestock Marketing Information Center Data Source: USDA-AMS & USDA-NASS up 11% in 2010

19. 19 Livestock Marketing Information Center Data Source: USDA-AMS

20. 20 Livestock Marketing Information Center Data Source: USDA-AMS

21. 21 Livestock Marketing Information Center Data Source: USDA-AMS, Compiled & Analysis by LMIC

22. 22 Livestock Marketing Information Center Data Source: USDA-AMS, Compiled & Analysis by LMIC

23. 23 Livestock Marketing Information Center Data Source: USDA-ERS & USDA-FAS, Compiled & Analysis by LMIC +17% in 2010

24. 24 Livestock Marketing Information Center Data Source: USDA-ERS & USDA-FAS

25. 25 Livestock Marketing Information Center Data Source: USDA-FAS

26. 26 Livestock Marketing Information Center Data Source: USDA-ERS & USDA-FAS

27. 27 Livestock Marketing Information Center Data Source: USDA-ERS & USDA-FAS

28. 28 Profitability Profitability in 2011, substantial but brief Feed and feeder cattle prices keep pressure on margins Profitability in cattle feeding = margin risk management

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32. 32 Livestock Marketing Information Center Data Source: USDA-AMS

33. 33 Cattle Crush Margin Return over corn and feeder cost considering basis adjusted futures and Live weight 1250 pounds Feeder weight 750 pounds Corn 50 bushels Farms differ, but approximately a $150 margin is needed to breakeven www.econ.iastate.edu/margins

34. 34 Yearling Cattle Crush Margin ($/Head) by Sale Month Cattle on Feed: Cash Feeder and Corn Price at Placement and Wednesday Live Cattle Futures Prices

35. 35 Cattle Summary Demand connected with the economy Demand added support to prices in 2010 Beef production declining until 2015+ Profitability in first quarter of year –Losses in second half of year Fed cattle price forecast $112-120/cwt

36. 36 Thank you Questions? Shane Ellis shanee@iastate.edu www.econ.iastate.edu/ifo www.econ.iastate.edu/margins 515-294-8030