LIVESTOCK REPORT
By Glenn Grimes

CATTLE
Demand for all meats, with the exception of turkey, continued very strong through April. Beef demand at the consumer level for January to April was up nearly 6 percent, pork up nearly 4 percent and broilers up nearly 6 percent. Turkey demand for this period at the consumer level was down 2.3 percent.

As of late May, the Canadian border was still closed to live cattle. However, several observers believe the border will open sometime this summer or early fall—unless another cow is found with BSE.

Our live fed cattle market continued very strong through May. The average price for fed cattle during April was $85.80 per cwt. live. This price was over 8 percent above a year earlier. The number of cattle on feed May 1 was down 2 percent from a year ago. This potential supply of fed cattle suggests fed cattle prices will continue quite strong through much of 2004.

The biggest concern for fed cattle prices is the demand for beef. Will the strong demand of 2004 continue beyond May? We believe the current driver for this demand is the low-carb diet. Weight loss diets of the past have been fads, but we believe the low carb diets may have a longer life than most. If so, and if we are building the beef cow herd, and if the buildup continues for a normal cycle, relatively high beef and cattle prices may last for several years.

Cow slaughter through the week ending May 15 was down 15.4 percent from a year ago. Dairy cow slaughter for this period was down more than 17 percent, and beef cow slaughter was down nearly 14 percent. Cow slaughter has been reduced some by the ban on live cattle imports from Canada. However, after adjusting for the lack of Canadian imports, cow slaughter was still down 9 to10 percent from 12 months earlier.

Bred heifers of good quality were selling for substantially more this spring than a year ago. At the Missouri Show-Me Select sale at Fruitland on May 1, bred heifers sold for a record setting average price of $1,392 per head. In 2003, the state average price in four Show-Me Select sales was $941 per head.

Commercial replacement cows were selling for a modest premium over slaughter cows this spring. However, commercial dairy cows were selling for a very big premium to slaughter cows.

Certainly, this spring’s feeder cattle prices were at a level to encourage a buildup in the cow herd. For the week ending May 28, medium- to large-frame No. 1 steers weighing 400 to 500 pounds at Oklahoma City sold from $123 to $136 per cwt. For this same date and sale, 700 to 800 pound yearling steers sold from $103 to $115.50 per cwt. If we have a normal or better feed grain crop this year, feeder cattle prices are likely to set a new record high in nominal dollars.

As expected, because of finding a cow with BSE in Washington state in December, our beef exports have been very small relative to last year. When beef exports will get back to normal is not predictable, but this is not likely to occur before late fall.

SWINE
Demand for pork continues to be strong at both the consumer level and at the live hog price level.

For January to April, consumer-level demand was up a short 4 percent and live-level demand was up a whopping 12 percent. For January through April, U.S. pork production was up 4.5 percent. Live hog prices for the same period were up nearly 27 percent from a year earlier. In 53 years of observing the hog industry, I have never witnessed demand growth of this magnitude. The big question is how long this strong demand will last. Most observers are forecasting a return to near last year’s demand level by the end of 2004.

We believe about one-fourth of the growth in pork demand has been due to increased pork exports. Mexico, Canada and the countries grouped as “other” were driving markets for the nearly 27 percent increase in pork exports through March. The other three-fourths of the demand growth were probably due to high beef prices and low-carb diets. We believe there is a good chance for this strong demand to last longer than most people expect.

Cash hog prices reached $60 per cwt. in mid-May but lost substantial ground in late May with high slaughter levels. Unless we reduce slaughter in June and early July to near 1.8 million head a week under federal inspection, the high price for 2004 was probably in May. However, we expect hog prices to be profitable for the average-cost producer through most, if not all, of the remainder of 2004, assuming a normal or better feed grain crop this year.

Feeder pig prices held very strong into late May. For the week ending May 28, 40 to 50 pound feeder pigs at United Tel-O-Auction sold from $101 to $105 per cwt., even with quite strong corn prices. With a normal or better feed grain crop, we expect feeder pig prices to stay above year-earlier levels through the remainder of 2004.