LIVESTOCK REPORT
By Glenn Grimes

CATTLE

Demand for beef through early 2005 held very strong. Demand growth for 2004 was between 7 and 8 percent. Beef demand in 2004 was up 20.4 percent from 1998, or an average of 3.4 percent a year. This is an almost unbelievable accomplishment following a decline of 29 percent from 1985 to 1998, or an average decline of 2.2 percent per year for 13 years. In fact, beef demand also declined from the late 1970s through all of the ‘80s and until 1999.

A number of factors are responsible for this turnaround in demand for beef. Probably the two most important are the improvement made by producers in fat-to-lean ratio of beef and the change in attitude of people about being able to include beef in a healthy diet.

Cattle producers stopped reducing the cattle herd during 2004. In fact, the U.S. herd increased 1 percent between Jan. 1, 2004, and Jan. 1, 2005. The total cow herd was 0.5 percent larger on Jan. 1, 2005, than a year ago and the beef cow herd was 0.6 percent larger.

The number of beef cow replacement heifers was up 4.1 percent in January 2005, compared to a year ago. The number of heifers being held for dairy herd replacements was up 2.8 percent, which is more than needed to keep milk prices at their recent level.

In Missouri, the cattle and calf crop inventory on Jan. 1 this year was up 2.3 percent from 12 months earlier. However, the total cow herd in Missouri increased only 1.3 percent. The Missouri beef cow herd was 1.7 percent larger and the dairy herd was 4.8 percent smaller on Jan. 1, 2005, compared to Jan. 1, 2004. The 70,000 head of cattle on feed in the Show-Me State on Jan. 1 was 8 percent more than a year ago.

The U.S. cattle industry is now in a growth mode for the first time since 1995. In the last cattle cycle, cattle numbers increased for 6 years but herd growth was only 8 percent for the entire growth period. If growth in beef demand continues, the buildup period of the new cycle that started in 2004 will likely show larger growth than the last cycle.

Unless demand deteriorates substantially in the next few years, cattle prices in general should be quite good. Both feeder cattle and fed cattle prices are expected to be stressed some when the border with Canada opens, but feeder cattle prices should be impacted more than fed cattle.

SWINE

Demand for pork and live hogs continued very strong through 2004 and into early 2005. Demand for pork for all of 2004 was up almost 3 percent compared to 2003. Live hog demand was up a remarkable 11.8 percent in 2004 from 12 months earlier, with pork exports responsible for about 25 percent of this increase.

Our pork exports for January to November amounted to 10.6 percent of our total pork production, or approximately 1 out of every 10 hogs slaughtered in the first 11 months of the year were exported.

January to November 2004 pork exports were up almost 27 percent from a year earlier. U.S. pork exports during the first 11 months were up 13.4 percent to Japan, up 20.2 percent to Canada, up 59.8 percent to Mexico, up 358 percent to Russia, down 21.4 percent to South Korea, down 20.8 percent to Hong Kong, up 89.4 percent to mainland China, up 50.3 percent to Taiwan and up 57.3 percent to the Caribbean.

For some reason, our pork exports to Japan since July have increased substantially compared to a year ago. For the January to July 2004 period, they were up 6.3 percent compared to the same months of 2003. For the month of August they were up 18 percent; September up 29.6 percent; October up 34.6 percent; and November up 40.5 percent compared to these months in 2003.

Growth in exports to Mexico began before the U.S. cow with BSE was discovered in December 2003 and strong export growth continues. For example, in October 2003 our exports to Mexico were up 34.6 percent from a year earlier. In November 2003 they were up 50 percent from a year earlier.

Current conditions indicate we will start 2005 with as much or more momentum for growth in pork exports as we started 2004. The probability is high for 2005 to be the fourteenth consecutive year with record high exports and the fifteenth consecutive year with growth in exports.

Pork imports for January to November 2004 were down 7.4 percent from last year. Balancing exports and imports, the U.S. had a net export of 5.16 percent of production compared with 2.58 percent for the same months in 2003.

Preliminary data in early February suggested pork producers may have started building the breeding herd. My next comment probably sounds like a broken record, but with between 2 and 3 percent productivity growth, we do not need to increase the size of the breeding herd if we want to maintain prices at an acceptable level for producers.

In fact, unless we can continue some demand growth, producers need to reduce the breeding herd about 1 percent a year. Long-term demand growth has been only 1.5 percent a year.

If the 2004 demand level for hogs can be maintained through 2005, hog prices are expected to average about the same to $2 to 3 per cwt. less than in 2004.