Livestock Outlook & Profit Potential Lee Schulz, Department of - PowerPoint PPT Presentation

Livestock Outlook & Profit Potential Lee Schulz, Department of Economics, Iowa State University (515) 294-3356; lschulz@iastate.edu

ESTIMATED AVERAGE COW CALF RETURNS Returns Over Cash Cost (Includes Pasture Rent), Annual $ Per Cow Projections for 3/3/17 6/7/17 10/1/17 11/13/17 500 2017 -$29 $3 $19 $69 2018 -$21 -$24 -$3 $4 400 300 200 100 0 -100 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Data Source: USDA & LMIC, Compiled by LMIC C-P-66 Livestock Marketing Information Center 11/13/17

ESTIMATED AVERAGE COW CALF COSTS Total Cash Cost Plus Pasture Rent, Annual $ Per Cow 1000 1990: $367 900 2000: $384 2010: $554 800 2014: $879 700 2015: $871 600 2016: $803 2017 f : $806 500 2018 f : $802 400 300 200 100 0 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 Data Source: USDA & LMIC, Compiled by LMIC 11/13/17 Livestock Marketing Information Center

Source: USDA/AMS

2017 Slaughter BEEF COW SLAUGHTER +10% (vs. 2016) Federally Inspected, Weekly -8% (vs. 2011-15) Thou. Head 70 65 60 55 50 45 40 35 JAN APR JUL OCT Avg. 2011-15 2016 2017 Data Source: USDA & LMIC, Compiled by LMIC C-S-34 11/17/17 Livestock Marketing Information Center

Source: USDA/AMS

Source: USDA/AMS

Backgrounding and Stocker Example November 29 th 550 Pound Calves in Iowa @ $167.65/cwt Sale Sale Sell Price, VOG, VOG, Weight Date $/cwt ADG DOF $/cwt $/head 650 1/08/18 $164.35 2.50 41 $146.23 $146.23 750 2/17/18 $156.43 2.50 81 $125.57 $251.14 850 3/29/18 $146.03 2.50 121 $106.41 $319.22 Increased Value ($/hd) Projected VOG 80% of Projected VOG COG ($/cwt) $125.57 $100.46 $85.00 $81.14 $30.91 $95.00 $61.14 $10.91 $105.00 $41.14 ($9.09) $115.00 $21.14 ($29.09) $125.00 $1.14 ($49.09) Trucking, interest, etc. must be subtracted to identify returns Source: USDA/AMS, CME Group

Source: USDA/AMS

Source: USDA/AMS

Source: USDA/AMS

CATTLE PLACED WEIGHING LESS THAN 700 POUNDS 1,000 Plus Capacity Feedlots, U.S., Monthly Mil. Head 1.4 1.3 1.2 1.1 1.0 0.9 0.8 0.7 0.6 0.5 0.4 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Avg. 2011/15 2016 2017 C-N-08A 11/19/17

CATTLE PLACED WEIGHING MORE THAN 700 POUNDS 1,000 Plus Capacity Feedlots, U.S., Monthly Mil. Head 1.6 1.5 1.4 1.3 1.2 1.1 1.0 0.9 0.8 0.7 0.6 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Avg. 2011/15 2016 2017 Data Source: USDA & LMIC, Compiled by LMIC C-N-08B Livestock Marketing Information Center 11/19/17

Cattle on Feed―11/17 report (1,000+ head capacity feedlots & <1,000 in Iowa) • Nov 1 On Feed: +6.3% yr/yr – Vs. +5.7% pre-report est. (+4.8%, +7.0%)  IA: +15.0% vs last year [1,000+ Head]  IA: -6.9% vs last year [<1,000 Head] • Oct Placements: +10.2% yr/yr – Vs. +7.1% pre-report est. (+3.6%, +13.1%)  IA: +10.1% vs last year [1,000+ Head]  IA: 16.5% vs last year [<1,000 Head] • Oct Marketings: +5.6% yr/yr – Vs. +5.4% pre-report est. (+5.0%, +5.8%)  IA: +3.1% vs last year [1,000+ Head]  IA: +29.6% vs last year [<1,000 Head] Data Source: USDA/NASS

CATTLE ON FEED OVER 120 DAYS US Total, Monthly Mil. Head 4.6 4.4 4.2 4.0 3.8 3.6 3.4 3.2 3.0 2.8 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Avg. 2011/15 2016 2017 Data Source: USDA & LMIC, Compiled by LMIC C-N-12 Livestock Marketing Information Center 11/19/17

CATTLE ON FEED OVER 90 DAYS MINUS OVER 120 DAYS Mil. Head US Total, Monthly 2.4 2.2 2.0 1.8 1.6 1.4 1.2 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Avg. 2011/15 2016 2017 Data Source: USDA & LMIC, Compiled by LMIC C-N-13 Livestock Marketing Information Center 11/19/17

STEER DRESSED WEIGHT Federally Inspected, Weekly Pounds 940 920 902 900 880 860 840 820 JAN APR JUL OCT Avg. 2011-15 2016 2017 Data Source: USDA & LMIC, Compiled by LMIC C-S-18 Livestock Marketing Information Center 11/17/17

SLAUGHTER STEER PRICES 5 Market Weighted Average, Weekly $ Per Cwt. 150 140 130 $119.35 120 110 100 90 JAN APR JUL OCT Avg. 2011-15 2016 2017 Data Source: USDA & LMIC, Compiled by LMIC Livestock Marketing Information Center

Historical and Projected Iowa Finishing Yearling Steer Returns (http://www2.econ.iastate.edu/estimated-returns/) October 2017 Summary Revenue: $1,457/steer (1,300 lbs @ $112.05/cwt) Feeder Cattle Purchase: $1,112/steer (750 lbs @ $152.30/cwt) Gross Margin (Fat-Feeder): $314/steer Break-Even COG (550 lbs added): $0.5716/lb VS Estimated COG: $0.7058/lb = -$73.82/steer margins

2014 = +$197.24 [+$41 to +$269] 2015 = -$225.12 [-$530 to +$43] 2016 = -$110.62 [-$359 to +$113] 2017 f = +$139.56 [-$74 to +$415] 2018 f = -$36.23 [-$130 to +$63]

Historical and Projected Iowa Finishing Yearling Steer Returns (as of 11/20/17) (http://www2.econ.iastate.edu/estimated-returns/) Place Closeout Net Fed Feeder Breakeven Breakeven Breakeven Mo-Yr Mo-Yr Return* FCOG** Price Price FCOG** Fed Price Feeder Price May-17 Oct-17 -73.82 70.58 112.05 152.30 57.16 117.73 142.46 Jun-17 Nov-17 23.02 70.35 120.30 153.87 74.53 118.53 156.94 Jul-17 Dec-17 -54.69 70.36 115.43 155.77 60.41 119.63 148.48 Aug-17 Jan-18 62.50 71.10 123.31 153.27 82.46 118.51 161.61 Sep-17 Feb-18 19.32 72.10 122.24 156.44 75.61 120.75 159.01 Oct-17 Mar-18 13.16 73.37 125.13 161.34 75.76 124.12 163.09 Nov-17 Apr-18 19.04 74.49 125.66 160.65 77.95 124.20 163.19 Dec-17 May-18 33.82 75.36 122.12 151.90 81.51 119.51 156.41 Jan-18 Jun-18 4.71 75.81 119.01 150.07 76.66 118.65 150.70 Feb-18 Jul-18 -57.27 76.32 114.43 150.01 65.90 118.83 142.37 Mar-18 Aug-18 -63.52 76.77 113.36 148.65 65.22 118.24 140.18 Apr-18 Sep-18 -110.35 77.87 111.07 150.12 57.81 119.56 135.41 May-18 Oct-18 -126.12 78.42 110.20 150.33 55.49 119.90 133.51 Jun-18 Nov-18 -100.19 78.92 111.50 148.76 60.70 119.21 135.40 Jul-18 Dec-18 -129.88 79.05 112.03 153.53 55.43 122.02 136.21 Aug-18 Jan-19 -86.00 79.70 115.04 152.42 64.06 121.66 140.95 Sep-18 Feb-19 -105.81 79.58 113.97 153.29 60.34 122.11 139.18 Oct-18 Mar-19 -82.50 79.87 116.16 153.76 64.87 122.50 142.76 * Net return is $/head and all other values are $/cwt. ** FCOG = Feeding cost of gain. Projected using basis adjusted futures prices.

NATIONAL WEEKLY DIRECT SLAUGHTER CATTLE - PRIOR WEEK SLAUGHTER AND CONTRACT PURCHASES (LM_CT153) LC (11/20/2017) Feb 18: 123.025 Apr 18: 123.700 Jun 18: 116.350

Data Source: USDA/AMS

Source: USDA/AMS

BOXED BEEF CUTOUT VALUE Choice 600-900 Lbs., Carcass, Weekly $ Per Cwt. 260 250 240 230 220 $210.22 210 200 190 180 170 JAN APR JUL OCT Avg. 2011-15 2016 2017 Data Source: USDA & LMIC, Compiled by LMIC Livestock Marketing Information Center

Source: USDA/AMS

U.S. Beef Exports, Jan-Sep 2017 (Carcass Weight Basis) Sep-17/Aug-17 Sep-17/Sep-16 Year-to-Date Country Percent Percent 1,000 lbs Percent Share Japan -13% 40% 142,497 29% 31% Mexico -11% 8% 20,185 7% 15% Canada -5% 8% 8,634 4% 11% South Korea -11% 3% 26,340 8% 16% Hong Kong -2% -8% 16,641 9% 10% China (Taiwan) 2% 5% 7,904 8% 5% Vietnam -24% 17% 10,779 98% 1% Netherlands 16% 8% 2,186 8% 1% Philippines 35% 21% 5,267 29% 1% Chile -47% -24% 3,868 19% 1% Bahamas -48% -35% -817 -11% 0% United Arab Emirates 26% 18% -681 -6% 1% Dominican Republic -41% -8% 1,048 8% 1% China (Mainland) 83% 3,462 0% Other Countries 15% 16% 15,396 14% 6% Total -8% 14% 262,710 14% WASDE U.S.: 2016: 2,556 mil lbs 2017: 2,855 (+12%) 2018: 2,970 (+4%) Source: USDA/ERS

U.S. Beef Imports, Jan-Sep 2017 (Carcass Weight Basis) Sep-17/Aug-17 Sep-17/Sep-16 Year-to-Date Country Percent Percent 1,000 lbs Percent Share Australia -16% 46% -129,138 -20% 22% Canada -7% -1% 11,371 2% 24% New Zealand -47% 1% -59,272 -11% 21% Brazil -39% -64% 6,037 6% 5% Mexico -6% 10% 98,071 29% 19% Uruguay -35% -18% 6,910 8% 4% Nicaragua -8% 6% 18,327 23% 4% Costa Rica -9% -16% -1,800 -9% 1% -7% -2% 421 6% 0% Other Countries -18% 5% -49,072 -2% Total WASDE U.S.: 2016: 3,015 mil lbs 2017: 2,966 (-2%) 2018: 3,030 (+2%) Source: USDA/ERS

Source: CME Group

2013 = +$6.21 [-$25.60 to +$24.57] 2014 = +$61.85 [+$13.15 to +$107.25] 2015 = +$7.93 [-$18.40 to +$26.25] 2016 = -$1.26 [-$35.52 to +$32.92] 2017 f = +$12.42 [-$12.68 to +$47.62] 2018 f = +$10.47 [-$12.08 to +$30.63]