LIVESTOCK REPORT
By Glenn Grimes

CATTLE

USDA announced that a cow slaughtered in November 2004 tested positive for BSE in a retest. The market reacted with some lower futures prices. However, we doubt this second cow with BSE will have much impact on demand for beef domestically.

Demand for beef at the consumer level was down about 1 percent for

January to May. The good news is that demand for beef in May was basically the same as a year ago. Demand for live fed cattle was up for January to May but less than 1 percent. The bad news is that demand for live cattle in May was probably down from a year ago.

Beef exports for January to April were up 162 percent compared to a year earlier but were still 77 percent below the same months in 2003.

Beef imports for January to April were down but less than 1 percent. The decline was in imports of beef from Australia and New Zealand.

Live feeder cattle imports from Mexico were up almost 11 percent in January to April compared to this period in 2004.

Cow slaughter for 2005 through the week ending June 11 was down 6.2 percent compared to this period a year ago. This reduction in cow slaughter is on top of about a 10 percent reduction in domestic cow slaughter in 2003. There is little question that cow-calf producers are increasing the breeding herd. The strong prices for feeder cattle along with some improvement in pasture and range conditions are the major reasons for the interest in building the breeding herd.

Feeder cattle prices in late June were down from record highs of this spring but were still very desirable. In June, 400 to 500 lb. steer calves were selling from $129 to $159 per cwt. Yearling steers were selling for $112 to $120 per cwt. at Oklahoma City.

Fed cattle prices were in the low $80s in late June-down about $8 per cwt. from a year earlier.

SWINE

Demand for pork at the consumer level during January to May was down between 2 percent and 3 percent compared to a year ago. The good news is that May demand for pork appeared to be holding level with the first 4 months of the year.

Also good news for producers was that the demand index for live hogs in January to May was up 2 to 3 percent from a year ago. However, live hog demand in May was probably somewhat lower than a year earlier.

Pork exports continue to show substantial growth. In April, pork exports were up 33.9 percent from 12 months earlier and for January to April they were up 23.9 percent compared to these months a year ago. Without the increase in pork exports, the demand index for live hogs would have been down 0.5 percent to 1 percent for January to May rather than up 2.4 percent.

Our live hog imports from Canada for January to April were down 14.5 percent. It is interesting to note that during that time, our imports of pork from Canada were down 5.7 percent and our live slaughter hog imports were down 18.3 percent while our exports of pork to Canada were up 26.7 percent. This suggests Canada's inventories may have been overstated or they consumed much more pork and sold a lot more to other countries.

The June 1 Hogs and Pigs report showed a short 1 percent increase in the hog breeding herd. The market herd and the total herd were up too, but less than 0.5 percent compared to a year ago.

Between March 1 and June 1, 2004, the breeding herd was reduced by 24,000 head. However, between March 1 and June 1, 2005, the breeding herd was increased by 36,000 head. This is just a modest increase, but the bottom line is that we need to reduce the breeding herd by about 1 percent annually to keep the increase in pork production in line with the growth in domestic demand.

Market inventories on June 1 indicate total hog slaughter will be down slightly in the last half of 2005, if marketings are consistent with inventories. However, total pork production in the second half of 2005 will probably be up due to heavier slaughter weights. In early June, barrow and gilt carcass weights under federal inspection were running more than 2 percent above a year ago.

According to the June report, farrowing intentions for both the third and fourth quarters of 2005 are down slightly compared to a year ago even though the breeding herd was up 0.7 percent on June 1. This suggests farrowings per animal in the breeding herd will decline about 1 percent in both of these quarters compared to 2004. For the short run, this would be good for the industry, but I am skeptical that it will occur. For the first half of 2005, current data shows about a 2 percent increase in farrowings per animal in the breeding herd.

If demand loss for live hogs in 2005 can be held to about half of the growth that occurred in 2004, live hog prices for the remainder of the year will likely be high enough to provide profits for the average-cost producer. This assumes a near normal feed grain crop in 2005.