LIVESTOCK REPORT
By Glenn Grimes

CATTLE
he July 1 cattle inventory showed signs of cow herd growth. Even though the number of beef cows and heifers that have calved was down by 0.3 percent on July 1 compared to 12 months earlier, the number of beef heifers being held for herd replacements was up 4.3 percent from the same date in 2003.

Missouri is a leader in this herd growth with an 8 percent increase in the number of beef cows and heifers that had calved compared to July 1 a year ago. Five of the top 11 cattle states had more beef cows and heifers that had calved on July 1, 2004, than on July 1, 2003.

The total cattle inventory on July 1 was down only 0.3 percent from the same date in 2003. This was the ninth year of declining herd size and is one of the longest reduction periods in history.

The 2004 calf crop is estimated to be down 0.54 percent from 2003. This will be the ninth year the size of the calf crop declined.

The supply of young cattle outside feedlots on July 1 was down about 0.6 percent from a year earlier. However, the supply of feeder cattle that will come from Canada when the border is opened will more than offset this decline. The border is likely to open in late 2004 to imports of young cattle from Canada.

The number of cattle and calves on feed July 1 was up 2 percent from a year earlier. However, because cattle are being placed on feed at lighter weights and are being fed longer, the rate of fed marketings is still running below 12 months ago. The number of 700-pound and heavier cattle placed on feed in June was down nearly 13 percent from a year earlier.

Feeder steer calves weighing 400 to 500 pounds in late July were selling from $140 to $157 per cwt. These prices are $35 to $40 per cwt. above 12 months ago. Feeder steers weighing 700 to 800 pounds were selling for about $30 per cwt. above a year ago.

Early August fed cattle prices were likely near the low for late summer. However, fed cattle prices will need to strengthen substantially from August levels or cattle being placed on feed this summer will lose money. There is hope that Japan will open its border to beef from the U.S. by the time you read this article. If so, and we do not lose some of the U.S. demand, it will be very positive for fed cattle prices.

Demand for beef at the consumer level continues very strong. Our demand index shows a growth of nearly 8 percent for the first 6 months of 2004 compared to the same months in 2003. In fact, the demand for all meats at the consumer level was stronger than a year earlier for January to June.

If the strong demand for beef is long-lasting and the buildup in the cattle herd continues, cattle prices are expected to stay relatively strong for several years.

SWINE
Pork exports for January to May were up nearly 28 percent from the same months in 2003. Our exports to Japan for this period were up 7.7 percent, but the main drivers in this big export growth were our neighbors, Mexico and Canada. MexicoÕs purchases were up nearly 82 percent for these 5 months and CanadaÕs were up 31 percent compared to this period in 2003.

Wholesale ham prices were up 56 percent in late July compared to a year ago on this date. Loin prices were up about 25 percent and belly prices were up a little less than 19 percent. The strong ham prices were due, at least in part, to large shipments to Mexico.

Our demand index for pork at the U.S. consumer level in January to June was up over 3 percent, but growth in demand at the live hog level was up a whopping 11.4 percent from 12 months earlier. Demand for all meats has shown growth in the past 12 months. However, demand for turkey is up less than 1 percent. I believe a substantial part of this increased demand is due to the positive image for meat that was generated by the publicity for low-carb diets. In early August, strong demand for live hogs was holding prices in the upper $50s per cwt. even though weekly slaughter was 3 to 5 percent larger than a year earlier.

IÕm concerned that hog producers may have stopped reducing their herds. Sow slaughter in July was near year-earlier levels and gilt slaughter numbers were running below the same period in 2003. With an average increase in productivity per breeding animal of 3 percent a year during the last 5 years, the North American hog industry needs to continue to reduce herd size by about 2 percent a year to maintain profitable prices.

The U.S. hog industry continues to concentrate, according to a study this year by the University of Missouri and Iowa State University.

Producers who marketed more than 50,000 head of hogs annually produced 59 percent of U.S. slaughter hogs in 2003. The number of producers of this size increased from 66 in 1994 to 159 in 2003. In 1994, the 66 producers produced 17 percent of U.S. slaughter hogs. In 2003, the 159 producers accounted for 59 percent of U.S. slaughter production. However, the increase in the number of producers in this size group appears to be leveling out. In 2000 there were 156 producers of this size, and their numbers only increased by three in the last 3 years.

Contract production is a very important part of the current U.S. hog industry. In 2003, 29 percent of the U.S. pig crop was farrowed under contracts and 41 percent of U.S. domestic slaughter hogs were produced under contracts. Based on this university study, the most satisfied people in the hog industry are the contract growers who own the production facilities and grow hogs for someone else.