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State of the livestock industry addressed by CattleFax

Photos by Gayle SmithCattle producers listen to Brett Stuart speak about marketing trends in the beef industry Feb. 5 in Rapid City.

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As the United States cowherd continues to shrink, producers are becoming more efficient in producing beef, explained a research analyst with CattleFax.

Brett Stuart spoke to a group of cattle producers about marketing trends in the beef industry, during a meeting hosted by the South Dakota Cattlemen’s Association and Intervet/Schering-Plough in Rapid City during the Black Hills Stock Show.

Stuart said current beef cow inventory in the United States has dropped below 32 million head, which is the lowest inventory in the United States since 1963. It has dropped 4.2 million or 11 percent since 1996.



Stuart added more heifers are also going into the feedlots, rather than going back into the herd as replacements. “The number of heifers on feed has grown significantly over the last four years,” he said.

Despite the low inventory, beef producers are becoming more efficient, Stuart explained. Beef production in the United States was slightly over 25 billion pounds in 2009, which is double what was produced when beef numbers were last this small in 1959.



Several factors such as the weather, profitability, land values, age of producer, regulations, commodity volatility and efficiency all play a role in beef cattle production. However, Stuart said the biggest variable affecting beef prices is beef demand.

Stuart explained that because of the outside investor money in fed cattle futures, the stock market crash dropped fed cattle futures into the 80 dollar range. “What has kept us in that range is weak demand,” he said.

Because of the downturn of the economy, the plummet in new home sales, and the automotive industry, the hide and offal market also suffered further reducing fed cattle values. People just aren’t buying as many new automotives, or new furniture for their homes, the analyst said. Hide and offal is considered everything that is not a carcass of the beef animal. When the recession hit, the hide value dropped from $66 to $23 a head, and when associated offal values are added in, the combined drop was over $80 a head from November to February, Stuart explained. “It is a pretty volatile piece that goes into our profitability model,” he said.

The economy is currently playing a major role in the beef industry, Stuart said. “Continued high unemployment means slow recovery for the food service industry,” Stuart explained. “Total foodservice industry traffic has experienced its steepest decline in 28 years.”

Restaurants serving higher end cuts like T-Bone, Prime Rib and Tenderloin are feeling the pinch, according to Stuart. Tenderloin prices were down 27 percent as of September 2009, mostly because people are out of work, or even those still working are watching every penny.

“They aren’t buying high-end beef cuts or eating out as often as they did when the economy was better,” he said.

However, not all portions of the food service industry are feeling the pinch. The fast food chains hope for a continuation of the recession because their market has increased, and they are doing great, Stuart said. Hamburger prices in September 2009 were up nine percent. Unfortunately, an increase in the price of hamburger is not enough to stimulate U.S. beef prices, since this portion of the industry relies heavily on beef imports.

Stuart explained fast food hamburger comes primarily from cull cow markets and imports.

“We are increasing other countries’ dollar because they are feeding the fast food chains here,” he said. “We import more beef than we export. We’re importing lean grinding beef from countries like Australia, New Zealand and Uruguay, to supply the fast food chains.”

Stuart said at one time, the United States processed the short plates, ribs and rolls into hamburger, but found they were able to make more money by shipping them to Asia as short rolls, ribs and plates, and replacing them with cheaper grinding meats from other countries.

“If you shut off imports, our lean beef price would go up to where consumers wouldn’t be able to buy it anymore. There is a point where fast food outlets like McDonalds would stop buying hamburger and replace it with other meats like chicken,” Stuart said. “The fast food industry has said they will need two percent more ground beef this year to meet their demand. Cull cow prices will probably be higher this year to meet that. I look for our herd numbers to continue to decrease this year.”

Stuart urged producers with cows to cull to watch the cull cow market this spring and summer.

“There will probably be some opportunities this summer in the cull cow market because of the demand for more hamburger,” he said.

Stuart said analysts also wonder whether the recession has caused people to eat less meat, or whether other factors are coming into play. In 2008, Stuart said the United States broke a 50-year trend on how much meat they eat per year, including beef, pork and poultry.

“We know vegetarianism is growing in this country and is a real threat to the meat industry,” he said.

Other factors such as health concerns, bogus health studies and hormone concerns in meat could all play a role in the decrease, he added.

Based on projections, Stuart said there are good indications out there that there will be future profits in the beef industry even though there is currently a decline in per capita consumption.

“We have to ask ourselves whether we are not producing enough, or are consumers not demanding enough,” he said.

Stuart explained that globally, food production will need to increase 40 percent by 2030, and 70 percent by 2050. Beef and dairy production will need to double by 2050.

“Farming in 2050 will occupy only 13 percent more land than what was used in 2008,” Stuart said. “Beef consumption is also projected to increase by 8.5 million metric tons (mmt) by 2018, which is only nine years from now. The United States only produced 12.2 mmt of beef in 2008.

“Beef exports will grow by 2.8 mmt by 2018,” Stuart continued. “This is the equivalent of 22 percent of the U.S. production today.”

Beef producers in the United States will need to continue to find ways to become even more efficient in order to meet the future demand.

As the United States cowherd continues to shrink, producers are becoming more efficient in producing beef, explained a research analyst with CattleFax.

Brett Stuart spoke to a group of cattle producers about marketing trends in the beef industry, during a meeting hosted by the South Dakota Cattlemen’s Association and Intervet/Schering-Plough in Rapid City during the Black Hills Stock Show.

Stuart said current beef cow inventory in the United States has dropped below 32 million head, which is the lowest inventory in the United States since 1963. It has dropped 4.2 million or 11 percent since 1996.

Stuart added more heifers are also going into the feedlots, rather than going back into the herd as replacements. “The number of heifers on feed has grown significantly over the last four years,” he said.

Despite the low inventory, beef producers are becoming more efficient, Stuart explained. Beef production in the United States was slightly over 25 billion pounds in 2009, which is double what was produced when beef numbers were last this small in 1959.

Several factors such as the weather, profitability, land values, age of producer, regulations, commodity volatility and efficiency all play a role in beef cattle production. However, Stuart said the biggest variable affecting beef prices is beef demand.

Stuart explained that because of the outside investor money in fed cattle futures, the stock market crash dropped fed cattle futures into the 80 dollar range. “What has kept us in that range is weak demand,” he said.

Because of the downturn of the economy, the plummet in new home sales, and the automotive industry, the hide and offal market also suffered further reducing fed cattle values. People just aren’t buying as many new automotives, or new furniture for their homes, the analyst said. Hide and offal is considered everything that is not a carcass of the beef animal. When the recession hit, the hide value dropped from $66 to $23 a head, and when associated offal values are added in, the combined drop was over $80 a head from November to February, Stuart explained. “It is a pretty volatile piece that goes into our profitability model,” he said.

The economy is currently playing a major role in the beef industry, Stuart said. “Continued high unemployment means slow recovery for the food service industry,” Stuart explained. “Total foodservice industry traffic has experienced its steepest decline in 28 years.”

Restaurants serving higher end cuts like T-Bone, Prime Rib and Tenderloin are feeling the pinch, according to Stuart. Tenderloin prices were down 27 percent as of September 2009, mostly because people are out of work, or even those still working are watching every penny.

“They aren’t buying high-end beef cuts or eating out as often as they did when the economy was better,” he said.

However, not all portions of the food service industry are feeling the pinch. The fast food chains hope for a continuation of the recession because their market has increased, and they are doing great, Stuart said. Hamburger prices in September 2009 were up nine percent. Unfortunately, an increase in the price of hamburger is not enough to stimulate U.S. beef prices, since this portion of the industry relies heavily on beef imports.

Stuart explained fast food hamburger comes primarily from cull cow markets and imports.

“We are increasing other countries’ dollar because they are feeding the fast food chains here,” he said. “We import more beef than we export. We’re importing lean grinding beef from countries like Australia, New Zealand and Uruguay, to supply the fast food chains.”

Stuart said at one time, the United States processed the short plates, ribs and rolls into hamburger, but found they were able to make more money by shipping them to Asia as short rolls, ribs and plates, and replacing them with cheaper grinding meats from other countries.

“If you shut off imports, our lean beef price would go up to where consumers wouldn’t be able to buy it anymore. There is a point where fast food outlets like McDonalds would stop buying hamburger and replace it with other meats like chicken,” Stuart said. “The fast food industry has said they will need two percent more ground beef this year to meet their demand. Cull cow prices will probably be higher this year to meet that. I look for our herd numbers to continue to decrease this year.”

Stuart urged producers with cows to cull to watch the cull cow market this spring and summer.

“There will probably be some opportunities this summer in the cull cow market because of the demand for more hamburger,” he said.

Stuart said analysts also wonder whether the recession has caused people to eat less meat, or whether other factors are coming into play. In 2008, Stuart said the United States broke a 50-year trend on how much meat they eat per year, including beef, pork and poultry.

“We know vegetarianism is growing in this country and is a real threat to the meat industry,” he said.

Other factors such as health concerns, bogus health studies and hormone concerns in meat could all play a role in the decrease, he added.

Based on projections, Stuart said there are good indications out there that there will be future profits in the beef industry even though there is currently a decline in per capita consumption.

“We have to ask ourselves whether we are not producing enough, or are consumers not demanding enough,” he said.

Stuart explained that globally, food production will need to increase 40 percent by 2030, and 70 percent by 2050. Beef and dairy production will need to double by 2050.

“Farming in 2050 will occupy only 13 percent more land than what was used in 2008,” Stuart said. “Beef consumption is also projected to increase by 8.5 million metric tons (mmt) by 2018, which is only nine years from now. The United States only produced 12.2 mmt of beef in 2008.

“Beef exports will grow by 2.8 mmt by 2018,” Stuart continued. “This is the equivalent of 22 percent of the U.S. production today.”

Beef producers in the United States will need to continue to find ways to become even more efficient in order to meet the future demand.


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