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.

Demand for beef at the consumer level continued to be very strong through May. For January to May, beef demand grew nearly 6 percent when compared to the same months of 2003.

As with pork, there is a chance this strong demand will last for quite some time. There is a good possibility that this strength is due to the positive image of meat expressed in the publicity of the low-carb diets. This publicity is influencing more people to eat more meat than just those on the low-carb diets.

If the current demand level can be maintained, additional demand growth due to population increase will allow the industry to start building the breeding herd at about 1 percent a year and maintain strong prices for some time. There is a chance that the herd is being increased now but not at the rate of 1 percent or more a year.

Beef imports for January to April were up 7.5 percent from a year earlier. The increase resulted from larger purchases from New Zealand, Brazil and Argentina.

Live cattle imports from Mexico for the first 4 months of the year were up nearly 12 percent from 12 months earlier. However, total live cattle imports for January to April were down 49 percent because of the ban on imports from Canada.

Feeder cattle prices in early July continued at record high levels. Four-weight steers were $0.31 to $0.38 per pound above a year earlier and 700 to 800 pound steers were 25 to 28 cents more per pound than the same week in 2003. Some four-weight steers sold for up to $155.50 per cwt.

On June 25 a cow tested inconclusive instead of negative for BSE using the quick test. Fortunately the final test was negative. These kinds of conditions can be expected in the future as about one animal in 10,000 is expected to test inconclusive. The good news is that only about 7 percent of those that test inconclusive with the quick test actually have BSE. These reports are likely to add volatility to the cattle market. Following the release of the news of the inconclusive test on June 25, most of the nearby live cattle futures contracts were down substantially on Monday, June 28.

SWINE
The June Hogs and Pigs report showed the total herd was up 0.8 percent on June 1, the breeding herd was down 1.5 percent, and the market herd was up 1.1 percent from 12 months earlier.

We are concerned that the market hog inventories are underestimated. The 180-pound and larger inventory was up only 1.8 percent, but daily slaughter through June was up about 4.5 percent. The under-60-pound market inventory was down 0.6 percent but the March to May pig crop was down only 0.4 percent. We imported nearly 200,000 more feeder pigs from Canada in April and May than a year earlier. A high percentage of these pigs were weaners, which suggests they would have been included in the under-60-pound inventory on June 1.

Based on the current rate of growth in productivity, producers need to continue to reduce the breeding herd size to maintain the current price levels. Productivity for the year ending May 31, 2004, increased nearly 3.8 percent, and productivity growth for the last 5 years ending May 31 averaged nearly 3.2 percent each year. Therefore, producers will need to reduce the breeding herd more than 1.5 percent annually-unless demand keeps increasing, which is not likely. Hopefully, the current level of demand can be maintained.

Preliminary data show a growth in demand for pork in January to May of 2004 of about 3 percent. We believe the current retail pork price does not reflect the actual demand for pork so far this year. The data shows retail pork chops were about $0.20 per pound below a year earlier with the wholesale price for loins up about $0.20 per pound for this 5-month period compared to a year ago. Demand for live hogs was up nearly 12 percent for January to May 2004 compared to 2003. This indicates more than the retail price increase was bid into live hog prices since the farm to retail spread was 4 percent smaller than a year ago.