LIVESTOCK REPORT
By Glenn Grimes
Cow slaughter in 2006 through May 13 was up 2.5 percent from
this period of 2005. The increase was in beef cow slaughter, which was up 8.8
percent. Dairy cow slaughter through May 13 was down 2.7 percent compared to
these months of 2005.
For the 4-week period ending May 13 beef cow slaughter was
up
We still believe the U.S. cow herd will be increased some in 2006 unless there is a severe drought over a significant portion of beef cow country.
Our beef demand index for January to April was down 2
percent from a year ago. This loss follows about a
4 months of 2004 and 2005. We believe these losses are due
to the decline in popularity of high protein diets and an increase in competing
meat supplies.
The good news is that our demand index for live fed cattle
was up
By late May, feeder cattle prices were down from the highs
of 2005 but were still good. In late May 400 to
Retail beef prices in April 2006 were down 5.5 percent from
a year earlier and retail choice beef prices for January to April were down 3.1
percent compared to a year ago. The lower beef prices were due to larger
supplies of beef, the reduction in beef demand, and larger supplies of
competing meats—especially poultry.
Beef exports for January to March 2006 were up 72 percent
from a year ago. However, beef exports were still 62 percent below 2003 before
the cow with BSE was found in Washington state. Beef imports for the first
three months of 2006 were up 1.4 percent from a year ago. Live feeder cattle
imports from Mexico were up 9.1 percent for the January to March period and
total cattle imports were up 111 percent from the same months in 2005. Our
border did not open to live cattle from Canada until July 2005.
Feeder cattle prices are expected to continue relatively strong for the summer and fed cattle prices are likely to be in the upper $70s in August 2006. Certainly near-normal rainfall levels will be very important to feeder cattle prices.
SWINE
The bright spot for the hog industry is pork exports. For
January to March 2006 pork exports were up 22.2 percent from this period of
2005. Remember, pork exports in both 2004 and 2005 were up over 20 percent from
the prior year. Pork exports for the first quarter of 2006 were 86 percent
higher the first quarter of 2003.
Several factors have contributed to these larger pork
exports. Producers can take credit for at least a portion of the increase. They
have improved
the quality of pork to meet the specifications of importing
countries and during the last 20 years they have provided about $55 million to
promote U.S. pork exports.
Our hog industry is probably about 16 percent larger in 2006
than it would have been if pork exports were still at the 1986 level. In addition to increasing the size of
the industry, pork exports have added over $6.3 billion to producersŐ incomes
over the last
About 14.5 percent of U.S. pork production during the first
3 months of 2006 was exported. The possible downside to this level of exports
is that a disease outbreak in the United States could stop all exports and hog
prices would likely be cut in half. Certainly we hope this never happens, but
it is always a possibility.
Pork demand at the consumer level is not performing very
well in 2006. For January to April consumer demand for pork was down 6.2
percent from last year. This loss in demand is probably mostly due to the
decline in the popularity of the high protein diets and larger supplies of
competing meats, especially poultry.
The good news is that live hog demand was down less than 4
percent for January to April 2006 compared to last year. This smaller drop in
live hog demand than consumer demand can be explained by the increase in pork
exports and population growth.
As of April 2006, the average cost producer has made money
for 27 consecutive months according to Iowa State University. With normal crop
production, these profits are expected to continue at least through September.
Hog producers, on average, may be in the best financial condition they have
ever been.
ProducersŐ profits are likely to disappear in the fourth
quarter of this year and red ink on average is expected for 2007. More pork and
higher feed costs are expected to be the major factors in reducing
profitability for the industry. This period of red ink is likely to last for
quite some time unless demand growth rescues the industry as it did in 2004.
Demand growth is possible but not likely.
Demand for feeder pigs continued quite strong into late spring but prices will be lower in the last half of 2006 because of lower slaughter hog prices and possibly higher feed prices.