beef cattle market outlook and trends dr. curt lacy extension economist-livestock
TRANSCRIPT
BEEF CATTLE MARKET OUTLOOK AND TRENDSDR. CURT LACY
EXTENSION ECONOMIST-LIVESTOCK
OUTLINE
Current Situation
Projections for 2011-2012
Things to watch
Market Alternatives
CURRENT SITUATION
WHERE ARE WE AND HOW DID WE GET HERE?
MED. & LRG. #1 & 2 STEER CALF PRICES500-600 Pounds, Georgia, Weekly
85
90
95
100
105
110
115
120
125$ Per Cwt.
Avg.2005-09
2010
2011
02/14/11Livestock Marketing Information CenterData Source: USDA-AMS, Compiled & Analysis by LMIC
MED. & LRG. #1 & 2 FEEDER STEER PRICES700-800 Pounds, Georgia, Weekly
70
75
80
85
90
95
100
105
110$ Per Cwt.
Avg.2005-09
2010
2011
02/14/11Livestock Marketing Information CenterData Source: USDA-AMS, Compiled & Analysis by LMIC
SLAUGHTER STEER PRICES5 Market Weighted Average, Weekly
80
85
90
95
100
105
110
115
JAN APR JUL OCT
$ Per Cwt.
Avg.2005-09
2010
2011
Livestock Marketing Information CenterData Source: USDA-AMS
BOXED BEEF CUTOUT VALUEChoice 600-900 Lbs. Carcass, Weekly
135
140
145
150
155
160
165
170
175
180
JAN APR JUL OCT
$ Per Cwt.
Avg.2005-09
2010
2011
C-P-6202/22/11
Livestock Marketing Information CenterData Source: USDA-AMS
OUTLOOK FOR 2011
WHAT CAN WE EXPECT THIS YEAR AND NEXT?
MEAT SUPPLIES WILL BE DOWN SLIGHTLY IN 2011
Source: USDA-WASDE, February 2011 Report
Commodity
2009 20102011
Projected 10 vs 09 11 vs 10
BILLION POUNDS PERCENT CHANGE
Beef 25.96 26.31 25.92 1.33% -1.50%
Pork 22.99 22.44 22.53 -2.45% 0.40%
Total Red Meat* 49.27 49.05 48.73 -0.45% -0.65%
Broilers 35.51 36.85 37.30 3.64% 1.21%
Total Poultry** 41.67 42.99 43.43 3.07% 1.01%
Total RedMeat & Poultry 90.95 92.04 92.16 1.18% 0.13%
C-N-0201/29/10
DECLINING COW NUMBERS REFLECT LACK OF PROFITABILITY IN THE SECTOR
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
25000
30000
35000
40000
45000
50000
JANUARY 1 “BEEF COW FACTORY’U.S., Annual
Replacement Heifers
Beef Cows
Mil. Head
Beef cows down 2 percent @ 30.9 millionBeef replacement heifers down 5 percent @ 5.20 millionTotal beef cow factory down 2.1percent
PROJECTED PRICES 2011 AND BEYOND
2010 2011 2012$40$50$60$70$80$90
$100$110$120$130$140
GA 500# steer GA 750# steer Choice fed steer GA Slaughter cow
Source: USDA, LMIC and UGA
Not very pretty
Fertilizer and feed costs will be the differences in profits (or lack of).
Longer-term producers are going to have look at increasing forage/less feeding.
PROJECTED PROFITS FOR 2011
North Georgia
South Georgia
Variable Costs ($/cow)
$497 $466
Variable Costs ($/Cwt.)
$117 $105
Total Costs ($/cow)
$730 $641
Total Costs ($/Cwt.)
$172 $145
MORE CORN USED FOR ETHANOL AS ENERGY ACT MANDATES
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
96/9
7
97/9
8
98/9
9
99/0
0
00/0
1
01/0
2
02/0
3
03/0
4
04/0
5
05/0
6
06/0
7
07/0
8
08/0
9
09/1
0
10/1
1
Feed and Residual Ethanol Exports Food Seed and Other Industrial
Million bushels
Source: USDA, 1/12/2011
Tight Stocks Since ’07 in Feed Crops Despite Large Crops
19.8%17.5%
11.6% 12.8% 13.9% 13.1%
5.2%
0%
10%
20%
30%
40%
50%
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11Ending Stocks Production Domestic Use and Exports Stocks:Use
US Corn Supply and Demand
OTHER ITEMSFood Safety Act
Antibiotic use in livestock
Animal welfare
Local/source-verified
MARKETING OPPORTUNITIES
TRENDS AND POTENTIAL MARKETING ALTERNATIVES
AN OVERVIEW OF BEEF MARKETING ALTERNATIVES
CommodityCalf salesStockeringRetained
ownership
Branded-beef Supply Chains
NaturalGrass-fedOrganic
Local
Consumer-direct“Freezer-beef”
OrganicGrass-fed
NaturalLOCAL
TWO BASIC MARKETS AND THEIR ALTERNATIVES
COMMODITY
• Typically cost-based
• Favors low-cost producers
• Ready-made market
• Beef examples
• - Sell @ weaning• - Stockering• - Retained Ownership
NICHE OR VALUE-ADDED
• Allows producers to receive more of the true value of their animals
• Higher-margin/lower volume proposition
• Often requires market development
• Beef examples usually involve marketing directly to consumers
• Locally-raised• Natural• Grass-fed• Organic
BASIC TRENDS
Increasing numbers of consumers want to know more about where their food comes from.
• What was it fed• How was it treated?• Who raised it?
As baby-boomers get older, they are more interested in leaner cuts of meat (but with taste).
Sustainable is coming to mean more than just “no chemicals or pesticides.”
Even as the economy improves there are still millions of Americans with very tight budgets
VALUE-ADDED BEEF SYSTEMS
BRANDED AND ALTERNATIVE MARKET COORDINATION
BRANDED BEEF PRODUCT SALES CONTINUE TO INCREASE
2/28
/200
3
10/1
0/20
03
5/21
/200
4
12/3
1/20
04
8/12
/200
5
3/24
/200
6
11/3
/200
6
6/15
/200
7
1/25
/200
8
9/5/
2008
4/17
/200
9
11/2
7/20
09
7/9/
2010
2/18
/201
10
200
400
600
800
1000
1200
Weekly Loads of “Branded” Beef sold 2003-2011
Branded
Source: USDA-AMS, compiled by LMICBranded = Upper 2/3 choice
2001
2004
2002
20052003
20062007 2008
2009
CERTIFIED ANGUS BEEF ® BRAND DEMAND
Source: Urner Barry and CAB LLC
19781980
19821984
19861988
19901992
19941996
19982000
20022004
20062008
20100
100200300400500600700800900
775 M
Annual Sales of the Certified Angus Beef ® Brand
Fiscal Year
Mill
ion
Poun
ds
2.1 M lbs / day
Source: CAB LLC
VALUE-ADDED SYSTEMS
Typically associated with a brand.
Can be for either conventional or alternatively produced beef.
Allows producers to benefit from improved genetics and management.
Very reliant on auditable and verifiable records.
Most require a Premise ID and BQA certification. May also require additional certifications or affidavits.
Can be a “happy-medium” between commodity beef and direct-marketing.
ALTERNATIVE MARKETS
DIRECT-MARKETING, GRASS-FED, NATURAL AND ORGANIC
NOTES ON ALTERNATIVE MARKETS
Not a lot of published data on many of the alternative markets (natural, grass-fed, locally-produced, etc.)
Some data on natural and organic.
Less solid numbers on grass-fed.
Overall consensus is the locally-produced market is growing.
Big concerns are antibiotics, hormones and traceability.
Source: Lacy, Clark, Umberger and Wolfe, 2006
CONSUMER’S STATED WTP FOR CERTAIN ATTRIBUTES (SURVEY RESULTS)
0
10
20
30
40
50
60
70
Percentage of Respondents Willing to Pay a 10% Premium
Grass-fed Pastured Grain/ Corn-fed Free-range No antibiotics
Not fed AB No Hormones Local Tender aged
Humane Traceable Natural Organic
CONSUMER’S STATED WTP FOR CERTAIN ATTRIBUTES (SURVEY RESULTS)
0
5
10
15
20
25
Percent of Respondents Willing to Pay a 25% Premium
Grass-fed Pastured Grain/ Corn-fed Free-range No antibiotics
Not fed AB No Hormones Local Tender Aged
Humane Traceable Natural Organic
Source: Lacy, Clark, Umberger and Wolfe, 2006
POUNDS OF NATURAL AND ORGANIC BEEF SOLD FROM 2007-2010
2007
Q1
2007
Q3
2008
Q1
2008
Q3
2009
Q1
2009
Q3
2010
Q1
2010
Q3
0.00
5,000,000.00
10,000,000.00
15,000,000.00
20,000,000.00
25,000,000.00
ORGANIC NATURAL
Source: NCBA
DOLLARS OF NATURAL AND ORGANIC BEEF SOLD FROM 2007-2010
2007
Q1
2007
Q3
2008
Q1
2008
Q3
2009
Q1
2009
Q3
2010
Q1
2010
Q3
0.00
20,000,000.00
40,000,000.00
60,000,000.00
80,000,000.00
100,000,000.00
120,000,000.00
140,000,000.00
ORGANIC NATURAL
Source: NCBA
SUMMARY ON ALTERNATIVE MARKETS
Sales of natural/organic beef are consistent at about 2.5%-3.0% of total beef sales.
Does not include sales of grass-fed beef.
Grass-fed beef continues to gain interest but is still roughly the size of the organic/natural market.
Anecdotal data suggests a higher demand for locally-produced, naturally-raised beef.
All of these markets require much more management (marketing and record-keeping) than a conventional system.
IMPLICATIONSWhile organic is still popular in some circles, “Local” is quickly becoming the new code-word for sustainable.
“Local” is still not well-defined. Some interpret is as being with 50-100 miles, while others consider it anything raised in their state. Other definitions limit it to 400 miles or less.
Many locavores are discovering that it is impossible to purchase everything locally (within 50-100 miles) so regional production systems are becoming the new local.
Increasing market share, but still probably never over 10-20% of the market for the following beef products:
• Locally-raised• All-natural grain-finished• Pasture-finished • Grass-fed• Organic
SUMMARY
Tight supplies and improving demand will mean higher prices for cattle for the foreseeable future.
Value-added chains and direct-marketing offer possibilities for cattle producers.
However, they require more management and records than producing commodity cattle.
They trick is determining your particular situation and what works best for you.
WWW.SECATTLEADVISOR.COM
DR. CURT LACY
EXTENSION ECONOMIST-LIVESTOCK
UNIVERSITY OF GEORGIA-TIFTON