LIVESTOCK REPORT
By Glenn Grimes

CATTLE

Beef exports continue to grow rapidly. May exports were up nearly 81 percent from last year. For January through May beef exports were up 77.7 percent compared to these months a year ago. However, they were 57 percent below these 5 months in 2003 before the cow with BSE was found in Washington state.

Beef imports for January to May were down 10.4 percent from this period last year. Live feeder cattle imports from Mexico during January to May were down 7.5 percent but the number coming from Canada and Mexico was up 71.9 percent from 2005. Remember, our border did not open to live cattle from Canada until July 2005.

Our demand index for beef at the consumer level for January to June was down 4.4 percent from this period a year ago. The good news for producers is that demand for live fed cattle was up 3.5 percent compared to a year ago.

Beef production in January to June was up 7.3 percent compared to the first six months of 2005. But due to beef exports, increased cold storage stocks, and population growth, beef consumption per capita was only up 1.4 percent.

 In late July, fed cattle prices had fallen to the upper $70s. In May and June, the low in fed cattle prices had been in the upper $70s. Unless beef production is larger than now indicated or demand weakens sharply, the low in fed cattle prices for 2006 is history.

Feeder cattle prices continue very strong with 400 to 500 lb. steer calves in mid-July at $139.50 to $162 per cwt., up $6 to $7 per cwt. from a year ago, and 700 to 800 lb. yearling steers at $114.25 to $123 per cwt., up $2 to $6 from a year ago. Feeder cattle prices are expected to continue quite strong unless the 2006 corn crop is cut short by dry weather.

The growth of ethanol plants in the next few years is likely to increase the price of corn substantially and also generate a large supply of distillers dried grains. Therefore, the potential increase in corn price should impact the cattle industry less than the hog and broiler industries.

Total cow slaughter for the year through July 1 was up 4.7 percent from a year ago. Dairy cow slaughter was down 0.2 percent but beef cow slaughter was up 10 percent. For the 4-week period ending July 1 total cow slaughter was up 17.1 percent, with dairy cow slaughter up 11.8 percent and beef cow slaughter up 21.1 percent compared to these weeks in 2005. The larger beef cow slaughter is believed to have been due to dry weather and short forage production in several beef cow areas. The increase in dairy cow slaughter was due to low milk prices. This larger cow slaughter will at least slow the growth in the U.S. cow herd, and may stop it.

SWINE

Hog prices improved substantially in May and June and held well through mid-July even though pork production in January to June was up 1.6 percent from a year earlier.
Our demand index for pork at the consumer level was down 5.3 percent in January to June compared to a year ago and pork consumption per person in the United States was down 0.7 percent compared to this period in 2005. However, because of larger pork exports and population growth our demand index for live hogs during this period was down only 1.7 percent.

Pork production in the last half of 2006 is expected to be higher than in the last half of 2005. The June 1 Hogs and Pigs report showed the total herd at 100.3 percent of a year ago, the breeding herd at 101.4 percent, and the market herd at 100.2 percent. Even though this report indicates slow growth in the size of the herd, total hog slaughter and pork production are expected to set record highs in 2006.

The June 1 Hogs and Pigs report indicates hog producers continue to use restraint in building the herd. A number of factors are probably contributing to this slow growth. Certainly the memory of 1998 and 1999 is still fresh in the minds of many hog producers. Also, the more concentrated industry tends to limit short to term flexibility; the permitting process for new facilities is slow; and the possibility of substantially higher corn prices in the next few years due to the demand for ethanol is a concern.

U.S. pork exports were up 11.3 percent in May compared to a year ago. Imports of pork into the U.S. were down 4.3 percent in May compared to last year, but for January to May they were up 3.5 percent compared to the first 5 months of 2005.

With pork exports at 15.09 percent of production for the January to May period and pork imports at 4.86 percent of production, the U.S. had a net export of 10.23 percent of production for this 5 to month period.

If pork exports hold at 10 to 15 percent above a year earlier for the remainder of the year as expected, it will be positive for hog prices.

Sow slaughter in June was up substantially compared to June 2005. For the week ending July 1, domestic sow slaughter was up 11.1 percent from a year ago and was up 10 percent for the 4 to week period ending July 1 compared to a year ago. We can only speculate why sow slaughter increased this much.  It’s possible that some producers may have decided it was a good time to depopulate and repopulate due to disease problems. Some producers who were nearing retirement may have decided this was a good time to exit the industry. The potential for higher feed prices due to expansion of the ethanol industry may be influencing decisions.

If feed prices do not increase very much during the next 12 months, it now looks like 2006 will be a fairly good profit year for producers and 2007 will be break even or provide a small profit.