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Beef Cattle Market Outlook 2007 Jim Sartwelle_ III Livestock

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					Beef Cattle Market Outlook
                     2007




                Jim Sartwelle, III
             Livestock Economist
        Factors driving beef markets in
                                 2007
•   Is cowherd expansion over?
•   Feed prices and availability
•   Domestic demand
•   Recovery of export markets
        Where are we in the cattle cycle?
•AFBF estimates less
than a 200,000 head
increase during 2006
•Drought-induced
liquidations were
significant in cow
country
•Replacement heifers
went to town
                                BEEF COW SLAUGHTER
                                  Federally Inspected, Weekly
Thou. Head
75
70                                                                    Avg.
                                                                      2000-04
65
60
55                                                                    2005
50
45
40                                                                    2006

35
                           R
  N




                                                        T
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                                                       C
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JA




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     Livestock Marketing Information Center                      C-S-34
     Data Source: USDA/NASS                                     12/22/06
                TOTAL CATTLE INVENTORY BY CYCLE
                                              U.S., January 1
Mil. Head
135
                                                                                         1938-49
125                                                                                      1949-58
                                                                                         1958-67
115
                                                                                         1967-79
105                                                                                      1979-90
                                                                                         1990-04
 95                                                                                      2004-05

 85

 75

 65
      0    1      2       3   4   5       6     7   8   9   10   11   12   13   14



 Livestock Marketing Information Center                                               C-N-40
 Data Source: USDA/NASS                                                              09/08/06
               PERCENT CHANGE IN CATTLE INVENTORY
                                              U.S., January 1

4
3
2
1
0
-1
-2
-3
-4
-5
-6
      1976     1979     1982   1985    1988     1991   1994   1997   2000   2003   2006



     Livestock Marketing Information Center                                                C-N-48
     Data Source: USDA/NASS                                                               09/08/06
                     U S LIVE CATTLE IMPORTS

Thou. Head
3000

2500
                                                                           Total
2000

1500
                                                                           Mexico
1000

 500
                                                                           Canada
   0
       1988   1990   1992   1994   1996   1998   2000   2002   2004




                                                                      11/15/06
    Everyone’s favorite subject – Biofuels

• Every 50 cent uptick in corn price
  increases fed cattle breakevens by:
    – $2.20 for a steer placed at 725 lbs.*
    – $3.50 for a steer placed at 500 lbs.*
• Popular parlor game of late 2006
    – Where will we feed cattle in the future?


* Fed to 1250 lbs. end weight
                  OMAHA CORN PRICES
                           Weekly
$ Per Bu.
3.90

                                               Avg.
3.40                                           2000-04


2.90
                                               2005
2.40


1.90
                                               2006

1.40
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                                          G-P-02
                                         01/02/07
            SOUTHERN PLAINS CORN PRICES
                          Weekly
$ Per Bu.
4.50

                                                     Avg.
4.00                                                 2000-04


3.50
                                                     2005
3.00


2.50
                                                     2006

2.00
              R
    N




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                                           G-P-04
                                          01/02/07
            DISTILLER DRIED GRAIN PRICES
                  Central Illinois, Weekly
$ Per Ton
130
120                                                     Avg.
                                                        2000-04
110
100
 90                                                     2005

 80
 70
 60                                                     2006

 50
              R
   N




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                                             01/02/07
  Domestic demand – cause for concern
                        RETAIL CHOICE BEEF DEMAND INDEX
                                        Annual, Using CPI 1980=100
Index Value
120
      100
100         94
                 88 86
                         83
                              79 76
 80                                   70 69
                                              66 65                                                63 61
                                                    63
                                                         59 58
 60                                                            56 55                56 55 58
                                                                     53 51
                                                                           50 52 53


 40

 20

  0
      1980       1982    1984   1986    1988    1990     1992   1994   1996   1998   2000   2002   2004
        Market price projections for 2007
•Fed Cattle             •7-wt Feeder Steers
   – Jan-Jun, $87-$93   (South Plains)
   – Jul-Dec, $85-$90     – Jan-Jun, $87-$98
•Slaughter Cows           – Jul-Dec, $94-$104
(boning utilities)      •5-wt Steer Calves
   – Jan-Mar, $40-$45   (South Plains)
                          – Jan-Jun, $98-$108
                          – Jul-Dec, $96-$110
                  Big questions for 2007

• Divergence among fed cattle and
  feeder/calf markets?
• Domestic demand rebound?
• Will drought cycles break?
• What will trade bring us during 2007?
Beef Cattle Market Outlook
                     2007




                Jim Sartwelle, III
             Livestock Economist

				
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