red meat and poultry outlook curt lacy extension economist-livestock

Red Meat and Poultry Outlook

Curt Lacy

Extension Economist-Livestock


Southern Region Outlook Conference

September 24, 2008

Overview Current meat S&O Beef S&O Pork Poultry

Livestock producers’ situation



September 24, 2008

Red Meat and Poultry in Cold Storage Total number 9%

higher compared to 07.

Red meat unchanged Beef -9% Pork +8%

Poultry +16% Chicken +12% Turkey +23%

0.00

0.50

1.00

1.50

2.00

2.50

Millions

JAN MAR MAY JUL SEP NOV JAN MAR MAY JUL

BEEF PORK POULTRY



September 24, 2008

Pork and Beef prices are higher compared to last year. Pork cutout has

been record high lately Major strength

from hams and loins.

Ribs and bellies are off from 2007.

HOG CUTOUT VALUEWeekly

55

60

65

70

75

80

85

90

95

100

JAN

APRJU

LO

CT

$ Per Cwt.

Avg.2002-06

2007

2008



September 24, 2008

Pork and Beef prices are higher compared to last year. Beef below last

year for most of 2008.

High likely occurred in early July.

BOXED BEEF CUTOUT VALUEChoice 600-900 Lbs. Carcass, Weekly

125

135

145

155

165

175

185

JAN APR JUL OCT

$ Per Cwt.

Avg.2002-06

2007

2008



September 24, 2008

Broiler wholesale prices have also been strong. SOME cost

increases have been passed on .

However, pressure from pork and beef has prohibited passing all of those costs along.

BROILER PRICES12-City Composite, Weekly

60

65

70

75

80

85

90

JAN

APRJU

LOCT

Cents Per Pound

Avg.2002-06

2007

2008



September 24, 2008

TOTAL RED MEAT & POULTRY PRODUCTIONQuarterly

0.0

20.0

40.0

60.0

80.0

100.0

Avg. 2002/06 2007 2008

Bil. Pounds

OCT-DEC

JUL-SEP

APR-JUN

JAN-MAR

M-S-3107/14/08

Total Meat Supplies are Higher Total + 4.7% YTD

compared to 2007. Beef = +2.0% Poultry +4.4% Pork +9.5%



September 24, 2008

Short Story More meat. Higher prices earlier in the year. However, a weak economy and

burdensome supplies in Q2 and Q3 have conspired to depress wholesale prices.



September 24, 2008

Beef Cattle Situation & Outlook



September 24, 2008

Feeder Cattle Situation – A Tale of 2 Weights

MED. & LRG. #1 & 2 STEER CALF PRICES400-500 Pounds & 700-800 Pounds, Georgia, Weekly

75

80

85

90

95

100

105

110

115

120

125

JAN

APRJU

LOCT

$ P

er C

wt.

700-800 400-500

Prices for calves and feeders have almost converged



September 24, 2008

CATTLE ON FEEDUS Total, Monthly

9.5

10.0

10.5

11.0

11.5

12.0

12.5

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Mil. Head

Avg.2002-2006

2007

2008

C-N-1009/19/08

Livestock Marketing Information Center

Data Source: USDA/NASS



September 24, 2008

C-N-0807/25/08



Lower Cattle Supplies in the Fall

NET FEEDLOT PLACEMENTSUS Total, Monthly

1.4

1.6

1.8

2.0

2.2

2.4

2.6

2.8


Mil. Head

Avg.2002-06

2007

2008

Net Placements lower.

Feeders weighing more than 800# up.

Feeders weighing less than 600# down.



September 24, 2008

Projections for Remainder of 2008 and Early 2009

Quarter 400-500# Steers*

700-800# Steers*

Live Cattle

(5 Area)

Cull Cows*

85-90%

Q3-2008 $99-$105 $92-$98 $90-$95 $52-$58

Q4-2008 $90-$98 $85-$93 $85-$93 $42-$48

Q1-2009 $100-$110 $85-$95 $93-99 $46-$54

Q2-2009 $105-$120 $95-$103 $100-$107 $52-$60



September 24, 2008

2008/2009 Summary An improved economy would help beef

demand. Larger total meat supplies in Q3 and Q4

could be troublesome. Corn crop (prices) vs. Live Cattle prices will

continue to drive the train for feeder cattle prices.



September 24, 2008

Marketing Alternatives This Summer and Fall

Current pricing scenario favors adding as much weight as possible.

Stockering or backgrounding may be economical.

Retained ownership may be profitable this year.



September 24, 2008

BEEF COWS THAT HAVE CALVEDJANUARY 1, 2008(1000 Head)

1,020 to 5,240 (9)520 to 1,020 (11)290 to 520 (9)

80 to 290 (11)0 to 80 (10)

C-N-1502/01/08

677Alaska

Hawaii

US Total

5.9

165 943

655730

CT 6

DE 4

936

553

82.7

460

427234

1015

1511 1159

513

12

MD 44

MA 9106

397

519

2080

1523

1883218

NJ 9

460

104

372

922

292

2053

605

158RI 1.4

197

1644

1079

5240

365

VT 10

692

272

202

270

733

32553



NH 5

CHANGE IN BEEF COW NUMBERSJANUARY 1, 2007 TO JANUARY 1, 2008(1000 Head)

2 to 141 (13)1 to 2 (3)

-6 to 1 (13)-25 to -6 (11)-74 to -25 (10)

Alaska

Hawaii

US Total

C-N-2802/01/08

-40-1

-10 22

-455

CT -1

DE 0

-14

-32

-3

-13

0 0-55

11 -48

23

1

MD -6

MA 2

-2

-8

1

-66

141

-57-15

1

NJ 1

20

-8

-20

-17

-4

30

8RI -0

-6

-25

-74

-63

21

0

-18

7

-10

5

-30

-339



53



September 24, 2008

JULY 1 BEEF COW INVENTORYU.S., Annual

25

30

35

40

45

50

1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008

Mil.

Hea

d

C-N-4601/30/06



Points to a January 1,2009 number lower than January 1, 2008



September 24, 2008

C-S-3407/18/08

Drought and high inputs continue to cause herd reductions

BEEF COW SLAUGHTERFederally Inspected, Weekly

40

45

50

55

60

65

70

75

80

JAN

APRJU

LOCT

Thou. Head

Avg.2002-06

2007

2008



September 24, 2008

CALF CROPU.S., Annual

30

35

40

45

50

55

1946 1951 1956 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006

Mil. Head



Fewer Cows = Smaller Calf Crop Fewer Supplies

Smallest calf crop since 1952



September 24, 2008

Fertilizer Prices 1997-2008 (and 2009)

$100

$300

$500

$700

$900

$1,100

$1,300

$1,500

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Apr-0

8

May

-08

Sep-

08

Jan-

09

$/

ton

Nitrogen (AN) Phosphorous (DAP) Potash (Muriate)



September 24, 2008

Fuel Prices 1997-2008

$0.00$0.50$1.00$1.50$2.00$2.50$3.00$3.50$4.00$4.50

$/

Gallo

n

Diesel (bulk)



September 24, 2008

Impact of Fuel & Fertilizer Prices on Cost of Production

$20

$40

$60

$80

$100

$120

$140

2002 2008

500# Calf ($/ Cwt.) Hay ($/ ton)



September 24, 2008

Incentives to Expand Beef Herd



September 24, 2008

Projected Prices 2009 and Beyond

$40

$50

$60

$70

$80

$90

$100

$110

$120

$130

2009 2010 2011

GA 500# steer GA 750# steer Choice fed steer GA Slaughter cow

Source: USDA, LMIC and UGA



September 24, 2008

Other Issues Southeast

More reliant on fertilizer Wider basis Increasing land values

Increasing demand for beef from alternative production systems Natural Organic Grass-fed

Increasing demand for locally produced foods Animal welfare MCOOL/NAIS



September 24, 2008

Pork Situation & Outlook

Pork Situation



September 24, 2008

Pork Situation Record supplies in 2008. UNBELIEVABLE export demand has

supported prices. Historically high input prices have certainly

taken a toll on profits.



September 24, 2008

Returns to farrow-finish hog producers have been negative for most of the past year!

-40

-30-20

-10

010

20

3040

50

2004

May Sep

2005

May Sep

2006

May Sep

2007

May Sep

2008

May

Source: IA State University



September 24, 2008

HOG SLAUGHTERFederally Inspected, Weekly

1,500

1,700

1,900

2,100

2,300

2,500

Thou. Head

Avg.2002-06

2007

2008

H-S-0509/12/08



September 24, 2008

PORK PRODUCTIONFederally Inspected, Weekly

280

330

380

430

480

530

Mil. Pounds

Avg.2002-06

2007

2008

M-S-1909/15/08



September 24, 2008


BARROW AND GILT PRICESIowa - So. Minnesota, Carcass Base Price, Weekly

45

50

55

60

65

70

75

80

85

90$ Per Cwt.

Avg.2002-06

2007

2008

H-P-0908/14/08



September 24, 2008

U S NET PORK EXPORTSCarcass Weight, Monthly

30

80

130

180

230

280

330

380

430

480


Mil. Pounds

Avg.2002-06

2007

2008

I-N-3209/12/08Livestock Marketing Information Center



September 24, 2008

Pork Summary Record supplies of pork in 2008. Supplies will be reduced some in 2009. Packing capacity may be a concern this fall. Prices will be pressured this fall. Prices should be stable to higher next year. High input prices will continue to plague

producers.

Poultry Situation and Outlook



September 24, 2008


BROILER PRICES12-City Composite, Weekly

60

65

70

75

80

85

90Cents Per Pound

Avg.2002-06

2007

2008

P-P-0109/16/08



September 24, 2008

These prices do not tell the whole story! Breast prices are

running 10.5% lower than last year.

Leg and wing prices are carrying the water for broilers this year.

Exports have played a major role in moving the dark meats.

WHOLESALE CHICKEN BREAST PRICESSkinless/Boneless, Northeast, Truckload, Weekly

110

120

130

140

150

160

170

180

JAN

APRJU

LO

CT

Cents Per Pound

Avg.2002-06

2007

2008

WHOLESALE CHICKEN LEG PRICESNortheast, Truckload, Weekly

35

40

45

50

55

60

65

70

75

80

JAN

APRJU

LO

CT

Cents Per Pound

Avg.2002-06

2007

2008



September 24, 2008

US Broiler Exports, Annual

0

1

2

3

4

5

6

7

8

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

Bill

ion

Po

un

ds

RT

COther

Romania

Korea

Ukraine

Cuba

Lithuania

Angola

Taiwan

Turkey

Canada

Mexico

China

Russia

© EMI Analytics, All Rights Reserved

July 2008 forward EMI Analytics forecast



September 24, 2008

What’s the impact of higher feed-grain prices on broilers? Since 2006

Corn prices up 67% Soybean meal

prices up 206%

Broiler costs up 137%.

US Broiler Production Cost (WOG basis)EMI Analytics model, weighted average, with OH & interest

45

50

55

60

65

70

75

80

85

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

cen

ts/lb

2006 avg. 60 cents2007 avg. 68 cents2008 avg. 81 cents2009 avg. 82 cents

Sept 2008 forward forecast




September 24, 2008

US Broiler Average Profitability Indexspot market prices, EMI Analytics model

-15

-10

-5

0

5

10

15

20

25

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

ind

ex

(1

99

8-2

00

0 b

as

e)

Sept 2008 forward forecast




September 24, 2008

Production will be lower the rest of the year. Broiler egg sets down. Broiler chick placements down. Total production for 2008 will be up “only” 2.3%. Will actually see a decrease in production in 2009.

8200

8400

86008800

9000

9200

9400

9600

2006 2007 2008 2009 2010

Quarterly Broiler Production Projected



September 24, 2008

Poultry Price Forecast Broiler prices should remain in the lower

$80s. Breast prices will continue to struggle. Legs and wing prices should stabilize. HOWEVER, disruptions in the export

market could be very problematic.



September 24, 2008

TOTAL RED MEAT & POULTRY PRODUCTIONQuarterly

19.0

20.0

21.0

22.0

23.0

24.0

JAN-MAR APR-JUN JUL-SEP OCT-DEC

Bil. Pounds

Avg.2002/06

2007

2008

2009

M-S-3107/14/08



September 24, 2008

Red Meat and Poultry Summary Record meat supplies this year. Q3-Q4 could be a big problem for pork supplies. Smaller beef, pork and poultry supplies in 2009. Exports for all meats continue to be favorable. All meat prices should remain steady to

improving for the remainder of this year and next year.

HOWEVER, if the economy continues to weaken all bets are off.



September 24, 2008

QUESTIONS?

red meat and poultry outlook curt lacy extension economist-livestock

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