LIVESTOCK REPORT
By Glenn Grimes

CATTLE

The Canadian border is still closed to live cattle and beef from animals over 30 months of age due to a few cattle being found with BSE in Canada. It was scheduled to open in early March to animals younger than 30 months of age. However R-CALF USA convinced a judge in Montana to enter the case and delay the border opening until a trial can be held. USDA filed an appeal to the judge's order in the Ninth Circuit Court of Appeals.

The courts move slowly. Whoever loses in the Ninth Circuit Court of Appeals will likely appeal, so the odds are high that the border will not be opened until late 2005 at the earliest.

Retail beef prices in February increased 1.1 percent from January. For January and February, retail beef prices were up 2.7 percent from these 2 months a year earlier.

All of the increase in retail beef prices and some of the wholesalers' margin was bid into live cattle prices. Live fed cattle prices for January and February were up 11.9 percent compared to these months in 2004. The wholesale-to-retail marketing margin was down 5.8 percent for these months compared to a year earlier.

Beef demand appears to remain strong. In May we will have our first estimate of the demand index for the first 3 months of 2005.

Cow slaughter through the week ending March 26 was down 4.5 percent compared to 2004. This reduction follows a decline of more than 10 percent in the slaughter of cows during this period in 2004 compared to 2003. This is strong evidence that the U.S. cow herd is in a building phase.

Cow inventories as well as all cattle inventories reached a low for this cycle in 2004. Therefore, we are in our second year of build-up in a new cattle production cycle.

Generally, cattle prices are quite strong during the build-up phase of a cattle cycle. In the last cycle, cattle numbers increased for 6 years. However, cattle prices were relatively strong for only 4 of the 6 years. One of the reasons cattle prices did not stay strong longer was weakness in beef demand.

During the first 4 to 5 years of the build-up during the last cycle, per capita demand for beef fell about 10 percent. During the last 6 years, beef demand increased about 15 percent or an average of 2.5 percent a year.

We are hopeful that beef demand will average a 1 percent increase per year for the next 5 to 6 years. If so, cattle prices will stay generally strong longer during this build-up period than they did in the last production cycle.

Feeder cattle prices are holding very strong but were probably close to the seasonal high in early April.

For the week ending April 8, 400 to 500 lb. steers at Oklahoma City averaged $138.50 to $161 per cwt. and 700 to 800 lb. yearling steers sold for $104 to $120.50 per cwt. at the same market. When our border with Canada opens, feeder cattle prices are likely to be pushed down substantially.

SWINE

The March 1 Hogs and Pigs report showed the breeding herd at the same level as a year ago, and both the market herd and the total herd up 1 percent.

If hog slaughter for the remainder of 2005 stays close to the levels indicated by the March report, hog slaughter in 2005 will be up from 2004 by less than 1 percent.

If pork demand can be maintained at year-earlier levels through the year, hog prices will likely hold close to the 2004 average. There are some signs that pork demand may be softening some from the strong levels of 2004. We will have an estimate for the demand index for the first 3 months of 2005 in the next issue of this magazine.

In early April, the International Trade Commission ruled that U.S. hog producers were not being harmed by the importation of live hogs from Canada. We believe in free trade between countries, but we do not believe it is fair free trade between the U.S. and Canada. Canada has a whole-farm income support program that supports its hog producers during periods of low prices.

The Canadians have not reduced the size of their hog breeding herd since the mid-90's. They built their breeding herd through 1998 and 1999 and again through the very low prices of 2002 and 2003. Since Jan. 1, 2000, the Canadian breeding herd has increased over 22 percent. During that same period, the U.S. breeding herd declined 4 to 5 percent.

In our opinion, the only way this would occur is if Canadian hog producers had a source of income other than their hogs. The U.S. Commerce Department has verified that Canadian producers are subsidized but that the subsidies are not illegal. If these situations do not change, we are likely to continue to see a larger share of the North American hog breeding herd located north of the U.S./Canadian border.

The U.S. hog industry started 2005 on a very positive note as to international trade. Our January pork exports were up nearly 25 percent and pork imports were down more than 7 percent compared to January 2004.

In January, our pork exports were up to all of our major markets except Hong Kong and Taiwan, with the biggest increases in shipments to Russia, mainland China, and the Caribbean. We believe the odds are high for 2005 to be the fourteenth consecutive year of record high exports with an increase of 5 to 7 percent over 2004.

Feeder pig prices set new record highs in late winter/early spring. Pig prices are expected to continue strong through 2005 with a normal feed grain crop.