AnS 226/426: The US Beef Industry

1. AnS 226/426: The US Beef Industry I.A: The Character and Structure of the Industry

2. Outcomes of this Unit As a result of completing this unit of study, you should be able to . . • Describe where cattle are located in the US and why. • Argue the profitability/viability of the industry. • Describe the segmented structure of the industry. • Describe cycles, trends and seasonality of the industry.

3. Readings • Purcell: “Prescriptions For A Healthy Beef Industry” http://ag.arizona.edu/arec/wemc/cattlemarket/Prescriptions_for_Healthy_Beef_ • Anderson, et. al: “The Cattle Cycle”http://ag.arizona.edu/arec/wemc/cattlemarket/CatlCycl.pdf

4. The US Beef Industry Is the beef industry “significant”? Is the industry “profitable”? Is the industry “viable”?

5. The US Beef Industry Is the beef industry “significant”? Is the industry “profitable”? Is the industry “viable”?

6. Total US Cattle Inventory Livestock Marketing Information Center Data Source: USDA/NASS

7. Pounds of Meat Animals Produced

8. Value of Meat Animals Produced

9. Beef has the highest value of US meat exports Value of US Meat Exports

10. Significant? • ~ 96 million head currently. • Largest supplier worldwide. • Sizeable domestic, and growing international consumer demand. • 1/3 pounds of meat animals, 1/2 the red meat produced in US. • 20% of total ag receipts, 40% of livestock receipts, 17% of GNP.

11. The US Beef Industry Significant? The US beef industry has a presence in every state.

12. TOTAL CATTLE NUMBERS JANUARY 1, 2005(1000 Head) Alaska Hawaii US Total Livestock Marketing Information Center Data Source: USDA/NASS

13. BEEF COWS THAT HAVE CALVEDJANUARY 1, 2005(1000 Head) Alaska Hawaii US Total Livestock Marketing Information Center Data Source: USDA/NASS

14. CATTLE ON FEED JANUARY 1, 2005(1000 Head) Livestock Marketing Information Center Data Source: USDA/NASS

15. AVERAGE NUMBER OF CATTLE ON FEEDIN 1000+ HEAD CAPACITY FEEDLOTS 2004 Other States US Avg. per Feedlot Livestock Marketing Information Center Data Source: USDA/NASS

16. The US Beef Industry Is the beef industry “significant”? Is the industry “profitable”? Is the industry “viable”?

17. Is the US Beef Industry viable? • Favorable to produce? • Customers? • Changing Market Demands?

18. Compared to other livestock enterprises , what are factors that favor cattle production?

19. What factors do NOT favor beef production ?

20. Advantages for cattle production . . • Utilize non-arable land, low quality roughage • less labor demands than some • low facility investment needed. • Environmentally friendly, nutrient recyclers

21. Suited to part time farming • meat of choice by consumers ( income dependent, however) • desirable life style for some • However . . .

22. What factors do NOT favor beef production . . . • Considerable capital investment required • non-liquid investment • requires some trained management and/or experience to succeed. • Public grazing lands present challenge.

23. low prolificacy rate • relatively feed inefficient • slow response to technology • over-reactive industry to economic pressures

24. Cattle Cycles:3 “patterns” observed • seasonal patterns

25. 3 “patterns” (cont.) • “trends”

26. Cattle Cycles:3 “patterns” (cont.) • “cycles” - see cattle inventory chart • note the “10 year”cycle • 6 and 4 pattern • Exceptions!! • causes • cow biology • heifer lag time

27. US Beef Producer Structure 1250 packers ($3.8 bil.) 120,000 breeders 720,600 registered cattle ($15 bil. invested) 810,000 producers 34 mil. hd of cows($180 bil.) 44,000 feedlots ($7.5 bil.)

28. Consumption Profit Center Profit Center Profit Center Production Does this represent the current beef industry accurately? Does it represent the future industry? Why or not? From Purcell . . .

29. The US Beef Industry What is meat by the statement (from Purcell): “The beef industry pricing system has failed to vertically coordinate the supply chain.” a. Supply chain?? b. What coordinates/connects chain segments? c. Why has “it” failed? How do we compensate?

30. Customers?

31. Total Meat Consumption (LMIC)

32. % of US Income Spent on Meat

33. Per Capita Meat Consumption by Species

34. Export/Import Situation . . .

35. US Meat Export Projections

36. Significant Export Markets • 92% of our exports go to 4 major countries in 2003 . . .

37. Major Cattle Export Markets

38. Major US Import Sources of Beef

39. Beef and Veal Export (% of production)

40. Value of US Meat Exports

41. Viable? • Questionable: See trends in inventory and prices (especially ‘75 on) • Competition strong from other species. • Huge political, biosecurity challenges • Have seen geometrically expanding export market, but lacks diversification. Great potential in Asia, esp. China. • Effective checkoff program. • Strong demand

42. The US Beef Industry Viability: The US Beef Industry has been moving toward increased “consolidation”.

43. Consolidation • Midsized operations becoming larger to remain viable with tighter margins and hold market options. • Feedlots with >1000 hd. Represent 2% of operations, but control > 80% of the cattle marketed. • “Big 3” packers process 76% of fed cattle.

44. The US Beef Industry Is the beef industry “significant”? Is the industry “profitable”? Is the industry “viable”?

45. Where do cattle have the greatest value in agriculture?

46. Productivity Increasing • Slaughter (05) down .3% but production up 3.8% (heavier carcasses) • If feed plentiful & feeder supplies tight, then cattle fed to heavier weights. • Production per cow continues upward trend.

47. Choice Steer $ vs Breakeven

48. Ave Returns to Cattle Feeders

49. Buy Sell Margins

50. Ave Cow Calf Returns