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CMR FAC | Livestock Outlook and Risk Management · Closing Market Report

• 0:00
  Todd Gleason: From the Land Grant University in Urbana Champaign, Illinois, this is a special edition of the Closing Market Report, presentations from the twenty twenty five Farm Assets Conference, the Livestock Outlook and Risk Management. I'm University of Illinois Extension's Todd Gleason. As we wrap up the year, many in the agricultural sector are looking toward 2026 with a mix of caution and curiosity. University of Illinois agricultural economist Brittney Goodrich took the stage at the Farm Assets Conference to break down the complex variables currently shifting the landscape for U. S.
• 0:35
  Meat production from the smallest cattle herd size since the 1960s to the unexpected impact of the new world screwworm on imports, Goodrich provides a comprehensive roadmap for what producers can expect in the beef and hog markets.
• 0:56
  Brittney Goodrich: First, to give you an idea of of what we're gonna talk about today, just give a broad overview of in general what's going on with meat supply and demand. Then we're gonna dig a little bit more into specifically beef cattle cycle, and then a little bit on hogs as well. So in terms of the the three major types of of meat production here in The US, you know, overall broilers have been increasing increasing over time. Our broiler production, part of that's driven by per capita demand here in The US, but also it's largely being driven by export markets as well. Our our beef production has remained relatively constant, and you're probably wondering if we've had, you know, this really small herd size, how is our beef production actually remaining constant?
• 1:48
  And and Joe also, gave the spoiler to this, but we import a lot of feeder calves from Mexico typically, and and so that's been making our our meat production, our beef production relatively constant even though we have a very small herd size. That's dropped off a little bit this year because of the the issue with the new world screwworm. And then pork production here in The US has also been increasing not as much as as broiler production, but it has been, primarily export driven, which is which is good for the pork industry. So here's what's been going on with per capita meat consumption. And I should say, I didn't say this, but so there's a bunch of the all of the gray boxes here are projections out to 2035.
• 2:46
  These are provided by USDA for their agricultural baselines. These are the early projections. So they're coming from data from approximately November. They're published in December. There will be an updated version published in, February '26, but that's where those those projections are are coming from.
• 3:09
  So in terms of per capita demand here in The US for, these three major beef, meat products. Broilers have been, increasing over time, as my stepdad affectionately calls it yard bird. And and I think a lot of that has to do with, potential health benefits of or or at least proposed health benefits of of eating, that yard bird. Beef and pork have remained, per capita about stable, here in The US over time, and that's, you know, projected out, for the next ten years to be relatively stable as well. So in terms of imports of meat products into The US, beef is the major one where we do actually see a relatively big import market.
• 4:04
  You can see, you know, starting in 2022, our beef imports started increasing quite a bit. You know, a lot of that is due to the the small herd size that we have right now, and so we we do eat a lot of beef here in The US, and so we need to meet that demand. Pork in broilers, over time, I mean, we we don't import much pork or or much chicken into The US. So beef is the the primary market that we look at imports, from. And so the major players in that and some of it has been affected by some of the trade issues, but Australia and Brazil are are a couple of the major big, beef importers, that we get beef from in The US.
• 4:58
  So then, in terms of exports, and again this has been very sort of volatile this year because of all of the issues with trade and retaliatory tariffs. But you can see over time, you know, pork and broilers, we've been increasing our exports to other countries, which is great. Beef has been, you know, increasing somewhat, but to the in well, actually in all three of these markets in between 2024 and 2025, we've actually seen a a decrease with the biggest decrease coming in the beef market. So we're seeing lower exports in these these meat markets, and again some of that's due to the the retaliatory nature and the uncertainty with trade policy that's going on right now. In the beef sector, it's a little bit of of the trade issues combined with the smaller herd size, combined with, fewer feeder calves coming in from Mexico.
• 6:10
  So then for net exports by far, we are net exports next net exporters of of broilers and pork, and that's been relatively increasing over time. With beef, we kind of fluctuate, between being net exporters or having that trade deficit. And you can see the big, increase in our trade deficit since about 2022 where we've been importing a lot more beef into The US than than exporting. So with that, that was kind of a big picture overview of what's going on in in each of these markets. And so now we'll dive a little bit more into beef cattle specifically.
• 7:00
  And so many of you may have seen something or heard that we have the smallest herd size since about, the nineteen sixties, and that is the case. We've been decreasing our, beef cow inventory, pretty steadily over time. There is some fluctuation in that that are that is of course due to this beef cattle cycle. And so I'm just this is a complicated slide, which event I mean, if you're a beef producer, you know, producing beef is also complicated. But, I'll just try and go over the big picture ideas with this slide.
• 7:41
  So basically, could see this black line, is cattle inventory, and then the blue larger interval line is cattle prices. So we know when, you know, cattle producers see higher prices, they're gonna think, oh, prices are increasing, so we should try and expand our herd size. So then your cattle inventory starts to increase, which then puts eventually downward pressure on that price. And eventually that cattle inventory increase starts to level off, and prices start to fall. And then you see that inventory in response to those falling prices and lower profitability, you see inventory start to decrease.
• 8:27
  And so where are we in this the the current beef cattle cycle? So I'm gonna say we're currently in this kind of transition time period, and maybe we're going to start rebuilding in the next maybe one to two years. A lot of this has been inhibited by, drought conditions that we've had, which I'll get into a little bit more. But we've seen historically high prices for for feeder calf and cattle prices in general. And so, in theory, we would start to see the herd size actually growing.
• 9:13
  So, I stole or maybe I should say borrowed this slide from doctor Darryl Peel at Oklahoma State University. I thought this was really a nice depiction of, beef cow inventory and how that sort of interacts interacts with that cattle cycle that we think about it. And so you can see he's outlined these periods of cyclical expansion that are due to those increasing prices, and then the cyclical liquidation or contraction that are in response to decreasing cattle prices. But then what's I'll try and work this. Yeah.
• 9:55
  What he also outlines here is specifically drought liquidation parts that that interact with this cattle cycle as well. And so you can see from about 2021 to currently, we've been in a state of drought liquidation for our cattle producers. Drought has been making it really hard to actually increase that herd size in response to those higher prices. So here are, again, I think Joe maybe showed well, I think his was all cattle. Mine just focus on beef cattle.
• 10:38
  But these are the projections for the early release projections that I said were released in December. We can see that for, these projections, USDA is is projecting that that we're going to see continually, into early twenty twenty six decreasing herd size, but then, potentially between 2026 and 2027, that that herd size starts to increase. And again, that's gonna be that's uncertain and based on a lot of factors, not least of which is is what drought is gonna look like in the coming year among all of the trade uncertainties and processors closing and that sort of thing. And this just shows the same graph with the expansionary periods highlighted for each cattle cycle. So you can see that USDA is projecting that 2026 begins that expansionary cycle, and they're projecting over time.
• 11:46
  They don't really maybe it starts to top out in 2035, but of course a lot of things can happen in that time period. So I did want to highlight, there have been changes in what USDA has projected. And so initially last February, they were projecting a very rapid, increase in in inventory. And then now here in December, that increase has has become, much slower and and likely due to a lot of the the issues that are, going on right now. So of course, the big question is what's gonna happen to prices?
• 12:33
  So we've, seen these sort of historically high prices happening, through 2020 projecting that we will continue to see prices increase into 2026. Though the the I will say the WASDE report that just came out this week, had fed steer prices, falling a little bit. So when the official report comes out in February, this may fall a little bit. But regardless, we're still seeing these kind of increasing prices to try and incentivize herd expansion. And these were feeder cattle prices for steers in Oklahoma City, so I also wanted to just kind of show you that what's happening here in Illinois does track with kind of what's going on in Oklahoma as well.
• 13:32
  And then this shows you monthly prices, so we get a little more detailed look at what's been going on with feeder calf prices, or feeder steer prices more recently. And so we have seen even though, you know, we're at historically high prices, we have seen kind of prices fall off since since September. And so that could be due to a lot of things, but there's typically a lot of seasonality in feeder calf prices regardless. And so we kind of we typically see them fall off in the fall just because of higher inventories of feeder calves. So this is kind of to be expected to some some sort, but there could be also, you know, other shocks that are that are coming into play as well.
• 14:24
  And this is just depicting that kind of the the seasonality in feeder calf prices for a number of years that were affected by drought. And so you can see they're typically higher, and then in the fall they fall off. So even though we've seen feeder calf prices fall off, it doesn't necessarily indicate that we're gonna continue seeing this decrease in price. So the million dollar question, that as a true economist, I'm not gonna give you an answer to, I'm gonna say maybe, is are we entering herd expansion? So we can look at a few different numbers for this.
• 15:09
  So one of them is we can look at the beef heifers that are intended for herd replacement. USDA measures these on January 1 and July 1 of every year. You can see that we've been decreasing relative to maybe some more recent years. That doesn't give us a great measure just because the overall herd size fluctuates, so we expect with a smaller herd you're going to have fewer herd replacements. So one of the things that I look at is, you know, out of all of the head of cattle that are slaughtered, what are the percentage of those that are cows and heifers?
• 15:56
  So if if they're not being slaughtered, that means they're potentially being retained into that beef herd. You can see the, I guess it's the green line here is the average from 2019 to 2023, and the blue line here is where we're at in 2025. And so in most of the months, I think all of the months except for maybe one, in 2025 we've had a lower percentage of cows and heifers being slaughtered than the average from the last few years. So that might indicate, you know, that we're retaining more cows and heifers to expand that beef herd. Another, way to look at this is, I mentioned that drought has a big impact on on our herd size, and so we can look at what's been going on in terms of drought and, the annual percentage change.
• 16:56
  So you can see in the background here is those percentage of land in drought conditions. You can see when there's a lot of drought, we're oftentimes decreasing our herd size. In years where there's there's not much drought, we're we're seeing a big increase in the annual herd size. And so while from 2024 to 2025, we're not seeing an increase yet, we're seeing less of a decrease than we were in previous years. So that might indicate some moderate expansion in the herd size.
• 17:36
  So again, are we entering herd expansion? Maybe. If so, slowly. And like I said, USDA projects growth starting between 2026 and 2027. There's a lot of different factors as I mentioned.
• 17:53
  Drought, the trade uncertainties that are happening. Another one that someone brought up at a recent cattle meeting that I gave a talk at was the aging producer population. So maybe folks are just not expanding the herd size because they're older and they don't want to deal with with more cattle. And there might be some evidence of this where on average beef producers are a little bit older than the total US farm population. So in terms of hog outlook, how much?
• 18:29
  Three minutes. Alright. I think I'm good. We're gonna go very quickly through this, And you can see here from this chart from USDA, about 75% of hogs are produced in The US under production contracts. So I'm kind of assuming that if you're a hog producer, you have some idea of what price you're gonna get in the relatively nearby future just from those production contracts, and they can vary quite a bit.
• 19:01
  So we're not gonna go too deep into the hog, the nearby hog outlook. But we can get some idea of kind of long term trajectory so that you can think about investments and buildings and structures. So in terms of the hog inventory in The US, it's been increasing over time. We've seen a little bit of drop off in the more recent years, but USDA projects that will continue increasing, our hog inventory. Illinois has been not exactly reflecting what's been going on in the rest of The US, but at the same time, we have seen, in the last decade or so, the number of hogs increasing here in Illinois.
• 19:47
  And a lot of that is we're seeing fewer farms, but the farms are getting bigger as we see in most other industries. And so for hog prices kind of, they have been increasing over time. USDA projects them in the long term to kind of be relatively stable. That's probably due to, you know, downward pressure from the increasing projected supply here in The US. So that's my very short hog outlook for you.
• 20:21
  So a few closing thoughts. So, you know, we do have this small cattle herd. It's still putting upward pressure on those prices. But as we've seen anybody who's been tracking, especially cattle markets, there's a lot of volatility, and and prices can drop pretty significantly overnight. So you have to be prepared for that.
• 20:45
  You know, eventually the cattle cycle will play out and these historically high prices will come down. So current projections for those price decreases are, 2028, 2029 time period, and that would be the average price. But remember, there's there's sort of seasonal pricing in there as well. And hog inventories are expected to put downward pressure on prices, so we have to be prepared for that as well. And so, you know, we need to be thinking about this downside price risk even in times of relatively good prices.
• 21:22
  So it's important to know your cost of production for marketing reasons. If you're large enough, you could hedge. Otherwise, there's there's actually a pretty good option. This livestock risk protection offered from USDA is essentially a subsidized option for hogs, feeder, and fed cattle. And you can also, enroll in some other subsidized insurance products.
• 21:48
  So there's pasture rangeland and forage, index insurance, which insures you for grazing livestock on the input side. So just to highlight, there are since maybe some of you aren't familiar with these kind of newer insurance products, I do have a bunch of information available on our PharmDoc website with information about the insurance products so you can check that out.
• 22:13
  Todd Gleason: That's Brittney Goodrich, she is a member of the PharmDoc team, an agricultural economist on the Urbana Champaign campus of the University of Illinois. From her December 12 livestock outlook and risk management presentation made at the Farm Assets Conference in Bloomington, Illinois. You've been listening to the closing market report from Illinois Public Media. Us online at willag.org, willag.org, where you can find all of the Farm Assets Conference presentations. Right now, I'm University of Illinois Extension's Todd Gleeson.