Opportunity and Risk with Record Cattle Prices - Dr. Derrell Peel, Oklahoma State University, from the 2014 Iowa Cattle Industry Convention, December 8 - 10, 2014, Des Moines IA, USA More presentations at http://www.trufflemedia.com/agmedia/conference/2014-iowa-cattle-industry-convention

1. Opportunity and Risk with
Record Cattle Prices
Derrell S. Peel
Breedlove Professor of Agribusiness and
Extension Livestock Marketing Specialist
Oklahoma State University
2014 IOWA BEEF INDUSTRY
CONVENTION

2. FED, FEEDER AND CALF PRICES,
Iowa Auctions and 5 Mkt Fed,
Weekly
80
100
120
140
160
180
200
220
240
260
280
300
2009 2010 2011 2012 2013 2014
$ Per Cwt.
Fed 7-800 lb. Steers 5-600 lb.Steers

3. Major Beef Market Factors
• Cattle Inventory and Beef Production
• Beef Demand
• International Trade
• Feed and Input Markets
• Forage Conditions

4. C-P-06
10/28/14
50
75
100
125
150
175
200
225
250
275
300
1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
$ Per Cwt
AVERAGE ANNUAL CATTLE PRICES
Southern Plains
500-600lb Steer Calves 700-800lb Feeder Steers Fed Steers
Data Source: USDA-AMS, Compiled and Analysis by LMIC
Livestock Marketing Information Center

5. C-P-62
10/27/14
140
160
180
200
220
240
260
280
JAN APR JUL OCT
$ Per Cwt.
BOXED BEEF CUTOUT VALUE
Choice 600-900 Lbs., Carcass, Weekly
Avg. 2008-12 2013 2014
Data Source: USDA-AMS
Livestock Marketing Information Center

6. WHOLESALE BEEF PRICE
Choice, Monthly
120
130
140
150
160
170
180
190
200
210
220
230
240
250
260
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
$ Per Cwt
Livestock Marketing Information Center
Data Source: USDA-AMS & USDA-NASS, Compiled & Analysis by LMIC

7. C-P-35
11/24/14
45
55
65
75
85
95
105
115
125
135
145
JAN APR JUL OCT
$ Per Cwt.
SLAUGHTER COW PRICES
Southern Plains, 85-90% Lean, Weekly
Avg. 2008-12 2013 2014
Data Source: USDA-AMS
Livestock Marketing Information Center

8. CATTLE INVENTORIES

9. C-N-01
07/28/14
80
90
100
110
120
130
140
1954 1959 1964 1969 1974 1979 1984 1989 1994 1999 2004 2009 2014
Mil. Head
JANUARY 1 TOTAL CATTLE INVENTORY
U.S., Annual
-1.8 Percent
2014 = 87.7 Million Head
Data Source: USDA-NASS
Livestock Marketing Information Center

10. U.S. Beef Cow Inventory
1920-2014
0
5
10
15
20
25
30
35
40
45
50
1920
1925
1930
1935
1940
1945
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
MillionHead

11. TOTAL BEEF COW INVENTORY BY CYCLE
U.S., January 1
28
29
30
31
32
33
34
35
36
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Mil. Head
1990-04
2004-14
C-N-40
01/31/14Livestock Marketing Information Center
Data Source: USDA-NASS, Compiled & Analysis by LMIC

12. JANUARY 1 BEEF COW INVENTORY
Iowa, Annual
600
650
700
750
800
850
900
950
1000
1050
1100
1150
1200
1990 1993 1996 1999 2002 2005 2008 2011 2014
1000 Head
Livestock Marketing Information Center
Data Source: USDA-NASS

13. C-N-30
07/28/14
20
25
30
35
40
1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014
Mil. Head
JANUARY 1 FEEDER CATTLE SUPPLIES
Residual, Outside Feedlots, U.S.
Data Source: USDA-NASS
Livestock Marketing Information Center

14. C-N-38
07/28/14
4.5
5
5.5
6
6.5
7
1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014
Mil. Head
HEIFERS HELD AS BEEF COW REPLACEMENTS
January 1, U.S.
+1.7 %
Data Source: USDA-NASS
Livestock Marketing Information Center

15. HEIFERS ON FEED
Quarterly
3200
3300
3400
3500
3600
3700
3800
3900
4000
4100
4200
4300
4400
4500
4600
4700
JAN-MAR APR-JUN JUL-SEP OCT-DEC
1000 Head
Avg.
2006/10
2011
2012
2013
2014
M-S-01
08/28/13Livestock Marketing Information Center
Data Source: USDA-NASS, Compiled & Analysis by LMIC

16. C-S-12
11/20/14
625
675
725
775
825
875
JAN MAR MAY JUL SEP NOV
Thou. Head
HEIFER SLAUGHTER
Federally Inspected, Monthly
Avg. 2008-12 2013 2014
Data Source: USDA-NASS
Livestock Marketing Information Center

17. C-S-20
11/20/14
170
190
210
230
250
270
290
310
330
350
JAN MAR MAY JUL SEP NOV
Thou. Head
BEEF COW SLAUGHTER
Federally Inspected, Monthly
Avg. 2008-12 2013 2014
Data Source: USDA-NASS
Livestock Marketing Information Center

18. HEIFER RETENTION AND COW CULLING
as % of January 1 Cow Herd
14%
15%
16%
17%
18%
19%
20%
1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016
Heifer %
7%
8%
9%
10%
11%
12%
13%
Culling %
Analysis by Derrell Peel
Data Source: USDA-NASS
Average:
Heifer % = 17.1
Culling % = 9.7
Cows
Heifers

19. JANUARY 1 BEEF COW INVENTORY
U.S., Annual
28
30
32
34
36
38
40
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
Mil. Head
Analysis by Derrell Peel
Data Source: USDA-NASS
22 Sep 2014

21. U.S. Ave., -11.0 %
Change in Beef Cow Inventory,
January 1, 2007-2014
-21.1%
-7.0%
+6.8%
-5.9%
-5.3%
-3.4%
-5.7%
-12.0%
-1.75, 2011
-15.9%
+6.1, 2011
-5.5%
-25.1%
-3.7%, 2011
-13.6%
-7.7%
-16.2%
+0.3%
+2.0%
-7.4%
-23.1%
-2.3%
-17.9%
-4.2%
-12.4%
-5.0%
-11.0%
-13.6%
-8.2%
-9.4%
-2.3%
-14.3%
-8.2%
+2.4%
+5.6%
+13.3%
-2.9%
-7.5%

22. U.S. Ave., -3.6 %
Percent Change in Pasture Acreage,
2007-2012
-13.1%
-1.6%
-3.0%
-1.1%
+0.2%
+2.6%
-7.2%
-4.4%
+0.2%
-2.4%
-1.4%
-11.5%
+5.8%
-18.9%
-5.7%
-4.9%
-3.8%
-9.9%
-9.7%
-23.5%
-1.4%
-21.2%
-5.6%
+0.30%
-31.0%
-8.7%
-15.9%
-19.0%
-20.8%
-9.6%
-14.8%
-23.6%
-16.6%
-15.1%
-2.6%

23. IOWA ALL HAY ACREAGE
Harvested Acres
900
1000
1100
1200
1300
1400
1500
1600
1700
1800
1900
2000
2100
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Thousand
G-NP-19
01/11/13Livestock Marketing Information Center
Data Source: USDA-NASS, Compiled & Forecasts by LMIC

24. U S ALL HAY ACREAGE
Harvested Acres
54000
56000
58000
60000
62000
64000
66000
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Thousand
G-NP-19
01/11/13Livestock Marketing Information Center
Data Source: USDA-NASS, Compiled & Forecasts by LMIC

25. C-N-10
11/21/14
9.5
10
10.5
11
11.5
12
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Mil. Head
CATTLE ON FEED
US Total, Monthly
Avg. 2008/12 2013 2014
Data Source: USDA-NASS
Livestock Marketing Information Center

26. G-NP-03
10/10/14
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
$ Per Bushel
NATIONAL AVERAGE CORN PRICE
Crop Year, Received by Farmers
Data Source: USDA-NASS, Compiled & Forecasts by LMIC
Livestock Marketing Information Center

27. C-P-21
11/20/14
75
100
125
150
175
200
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
$ Per Cwt
CHOICE STEER PRICE vs BREAKEVEN
Cattle Feeding, S. Plains, Monthly
Steer Price Breakeven Projected Breakeven
Data Source: USDA-AMS & USDA-NASS, Compiled & Analysis by LMIC
Livestock Marketing Information Center
Latest Data: October 2014

28. C-P-22
11/20/14
-325
-275
-225
-175
-125
-75
-25
25
75
125
175
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
$ Per 1000 lbs
AVERAGE RETURNS TO CATTLE FEEDERS
Feeding 725 Lb. Steers. S. Plains, Monthly
Data Source: USDA-AMS & USDA-NASS, Compiled & Analysis by LMIC
Livestock Marketing Information Center
Latest Data: October 2014

29. Share of Cattle on Feed
Iowa and Nebraska, 12 Month Moving Ave.
21.0%
23.0%
25.0%
27.0%
29.0%
31.0%
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14

30. Share of Cattle on Feed
Texas and Oklahoma, 12 Month Moving Ave.
21.0%
23.0%
25.0%
27.0%
29.0%
31.0%
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14

31. Texas Triangle and Omaha Corn
Prices
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
2011 2012 2013 2014
$ Per Bushel
Omaha
Texas
Livestock Marketing Information Center
Data Source: USDA-AMS & USDA-NASS, Compiled & Analysis by LMIC

32. C-S-09
10/23/14
2200
2300
2400
2500
2600
2700
2800
2900
3000
3100
JAN MAR MAY JUL SEP NOV
Thou. Head
COMMERCIAL CATTLE SLAUGHTER
Monthly
Avg. 2008-12 2013 2014
Data Source: USDA-NASS
Livestock Marketing Information Center

33. C-S-16
11/20/14
1050
1150
1250
1350
1450
1550
1650
JAN MAR MAY JUL SEP NOV
Thou. Head
STEER SLAUGHTER
Federally Inspected, Monthly
Avg. 2008-12 2013 2014
Data Source: USDA-NASS
Livestock Marketing Information Center

34. C-S-18A
11/29/14
760
770
780
790
800
810
820
830
840
JAN APR JUL OCT
Pounds
CATTLE DRESSED WEIGHT
Federally Inspected, Weekly
Avg. 2008-12 2013 2014
Data Source: USDA-AMS & USDA-NASS
Livestock Marketing Information Center

35. C-S-18
11/29/14
810
820
830
840
850
860
870
880
890
900
910
JAN APR JUL OCT
Pounds
STEER DRESSED WEIGHT
Federally Inspected, Weekly
Avg. 2008-12 2013 2014
Data Source: USDA-AMS & USDA-NASS
Livestock Marketing Information Center

36. Steer Dressed Weights
Monthly, Federally Inspected
760
780
800
820
840
860
880
900
920
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Pounds

37. Steer Carcass Weight
Federally Inspected
600
625
650
675
700
725
750
775
800
825
850
875
900
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Pounds

38. M-S-02
10/23/14
1700
1800
1900
2000
2100
2200
2300
2400
JAN MAR MAY JUL SEP NOV
Mil. Pounds
COMMERCIAL BEEF PRODUCTION
Monthly
Avg. 2008-12 2013 2014
Data Source: USDA-NASS
Livestock Marketing Information Center

39. BEEF PRODUCTION
vs. BEEF COW INVENTORY
Inventory on January 1, U.S.
28
29
30
31
32
33
34
35
36
37
1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017
Mil. Head
22
23
24
25
26
27
28
Bil. Pounds
Commercial Beef Production
Beef Cow Inventory
M-S-23
08/10/12Livestock Marketing Information Center
Data Source: USDA-AMS, Compiled & Analysis by LMIC

40. 2014/2015 Meat Production and Consumption
Production Consumption
Per Capita
Consumption
Change
2013 2014 2015 2014-
2015
2015 2014-2015
Million
lbs.
Million
lbs.
Million
lbs.
% Retail Lbs. %
Beef 25829 24501 24155 -1.4 53.4 -1.7
Pork 23206 22920 23475 +2.4 46.3 +0.4
Broilers 37425 38049 39577 +4.0 84.7 +2.0

41. M-P-11
11/21/14
400
450
500
550
600
650
JAN MAR MAY JUL SEP NOV
Cents Per Pound
RETAIL BEEF PRICE
All Fresh, Monthly
Avg. 2008-12 2013 2014
Data Source: Bureau of Labor Statistics & USDA-ERS
Livestock Marketing Information Center

42. RETAIL BEEF PRICE
Monthly
350
375
400
425
450
475
500
525
550
575
600
625
650
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
$ Per Cwt
All Fresh
Choice
Livestock Marketing Information Center
Data Source: USDA-AMS & USDA-NASS, Compiled & Analysis by LMIC

43. M-P-21
12/01/14
450
500
550
600
650
700
750
800
850
900
950
JAN APR JUL OCT
Cents Per Cwt.
WHOLESALE BEEF RIBEYE PRICES
Boneless, Light, Weekly
Avg. 2008-12 2013 2014
Data Source: USDA-AMS
Livestock Marketing Information Center

44. M-P-23
12/01/14
700
800
900
1000
1100
1200
1300
1400
JAN APR JUL OCT
$ Per Cwt.
WHOLESALE BEEF FULL TENDER PRICES
Musl-On, 5 Pounds and Up, Weekly
Avg. 2008-12 2013 2014
Data Source: USDA-AMS
Livestock Marketing Information Center

45. 140
160
180
200
220
240
260
280
300
320
340
JAN APR JUL OCT
$ Per Cwt.
WHOLESALE BEEF CHUCK PRICES
Boneless 2 Piece, Weekly
Avg. 2008-12 2013 2014
Data Source: USDA-AMS
Livestock Marketing Information Center
12/01/14

46. M-P-22
12/01/14
140
160
180
200
220
240
260
280
300
320
JAN APR JUL OCT
$ Per Cwt.
WHOLESALE BEEF BOTTOM ROUND PRICES
18-33 Pounds, Weekly
Avg. 2008-12 2013 2014
Data Source: USDA-AMS
Livestock Marketing Information Center

47. M-P-24
12/01/14
140
160
180
200
220
240
260
280
300
320
JAN APR JUL OCT
$ Per Cwt.
WHOLESALE BONELESS BEEF PRICES
Fresh, 90% Lean, Weekly
Avg. 2008-12 2013 2014
Data Source: USDA-AMS
Livestock Marketing Information Center

48. M-P-25
12/01/14
50
70
90
110
130
150
170
JAN APR JUL OCT
$ Per Cwt.
WHOLESALE BONELESS BEEF PRICES
Fresh, 50% Lean, Weekly
Avg. 2008-12 2013 2014
Data Source: USDA-AMS
Livestock Marketing Information Center

49. INTERNATIONAL TRADE

50. I-N-16
11/05/14
150
170
190
210
230
250
270
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Mil. Pounds
US BEEF AND VEAL EXPORTS
Carcass Weight, Monthly
Avg. 2008-12 2013 2014
Data Source: USDA-ERS & USDA-FAS
Livestock Marketing Information Center

51. I-N-06
08/29/14
0.0
0.5
1.0
1.5
2.0
2.5
3.0
1991 1994 1997 2000 2003 2006 2009 2012 2015
Bil. Pounds
US BEEF AND VEAL EXPORTS
Carcass Weight, Annual
Data Source: USDA-ERS & USDA-FAS, Compiled & Analysis by LMIC
Livestock Marketing Information Center

52. I-N-15
11/05/14
145
165
185
205
225
245
265
285
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Mil. Pounds
US BEEF AND VEAL IMPORTS
Carcass Weight, Monthly
Avg. 2008-12 2013 2014
Data Source: USDA-ERS & USDA-FAS
Livestock Marketing Information Center

53. I-N-12
08/29/14
1.5
2.0
2.5
3.0
3.5
4.0
1991 1994 1997 2000 2003 2006 2009 2012 2015
Bil. Pounds
US BEEF AND VEAL IMPORTS
Carcass Weight, Annual
Data Source: USDA-ERS & USDA-FAS, Compiled & Analysis by LMIC
Livestock Marketing Information Center

54. I-N-13
07/16/14
0
500
1000
1500
2000
1988 1991 1994 1997 2000 2003 2006 2009 2012
Thou. Head
CATTLE IMPORTS FROM CANADA AND
MEXICO
Annual
Mexico Canada
Data Source: USDA-ERS & USDA-FAS, Compiled &
Analysis by LMIC
Livestock Marketing Information Center

55. Price-Weight Relationship
Medium/Large No. 1 Steers, December 8, 2014
200
215
230
245
260
275
290
305
320
335
350
365
375
425
475
525
575
625
675
725
775
825
875
925
weight (pounds)
Price($/cwt)
Iowa
Okla

56. Price-Weight Relationship
Medium/Large No. 1 Steers, September 12, 2014
200
215
230
245
260
275
290
305
320
335
350
365
375
425
475
525
575
625
675
725
775
825
875
925
weight (pounds)
Price($/cwt)
Iowa
Okla

57. Steer Price, Total Value and Value of Gain
December 8, 2014, Iowa Combined
Weight
(lbs)
Average
Price
($/cwt.)
Total
Value
($/hd)
VOG
400 lb.
Beg.
Weight
($/lb.)
VOG
450 lb.
Beg.
Weight
($/lb
VOG
500 lb.
Beg.
Weight
($/lb.)
VOG
550 lb.
Beg.
Weight
($/lb.)
VOG
600 lb.
Beg.
Weight
($/lb.)
VOG
650 lb.
Beg.
Weight
($/lb.)
400 $340.48 $1,362
450 $322.47 $1,451 $1.78
500 $311.48 $1,557 $1.95 $2.13
550 $292.35 $1,608 $1.64 $1.57 $1.01
600 $275.63 $1,654 $1.46 $1.35 $0.96 $0.92
650 $262.91 $1,709 $1.39 $1.29 $1.01 $1.01 $1.10
700 $252.52 $1,768 $1.35 $1.27 $1.05 $1.06 $1.14 $1.17
750 $246.47 $1,849 $1.39 $1.32 $1.16 $1.20 $1.30 $1.40
800 $236.98 $1,896 $1.33 $1.27 $1.13 $1.15 $1.21 $1.25
850 $230.15 $1,956 $1.32 $1.26 $1.14 $1.16 $1.21 $1.24
900 $227.27 $2,045 $1.37 $1.32 $1.22 $1.25 $1.31 $1.35

58. C-P-66
09/10/14
-100
0
100
200
300
400
500
1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
$ Per Cow
ESTIMATED AVERAGE COW CALF RETURNS
Returns Over Cash Cost (Includes Pasture Rent), Annual
Data Source: USDA-AMS, Compiled and Analysis by LMIC
Livestock Marketing Information Center

59. 2015 Market Situation
• Strong prices for cattle and beef
• Record cow-calf returns
• Value of gain for stocker production
• Market versus production risk
• Margin squeeze for feedlots and packers
• Beef demand challenges
• Continued herd rebuilding
– If no drought

60. The Weekly Email Newsletter
From OSU Animal Science and Agricultural
Economics
• Send Email to
derrell.peel@okstate.edu