Shane Ellis, an Iowa State University Extension livestock economist.

Iowa cattle and swine producers are completing an overall profitable year, but there are clouds on the horizon that could dampen their bottom lines during 2011.

That assessment came from Shane Ellis, an Iowa State University livestock economist on Nov. 10 during the Pro-Ag Outlook Conference at the Webster County Extension office.

“Even though things are tight,”?Ellis told Farm News, “they aren’t so bleak as 2009.

“But it’s time to play it smart and make things work. There are a lot of dynamics that people can do, but this is not a ‘gimme’ business.”

At issue, Ellis said, is that all livestock feeders are looking at higher feed costs and, in the case of beef producers, higher replacement costs to restock the feedlot.

Beef in upper 90s

Ellis said he expects the slaughter market will remain in the upper 90-cent bracket through the remainder of the year, however replacement cattle futures prices this week reached a range of $1.10 for November to $1.15 per pound in January 2011.

The reason for the high feeder costs is the continued short supply of calves in the U.S. Beef cow slaughter numbers in September, about 300,000 head, were well above 2009, at 270,000 head, and the five-year average of about 240,000 head.

Ellis said cattle feeders have options of buying larger calves and market them at lighter finishing weights, feeding them for a shorter duration to offset the high feed costs.

Nevertheless, Ellis said he expects the rising feed costs will pressure the feeder market in 2011 and producers will see those prices drop somewhat.

“If your customers can’t afford them,”?Ellis told the audience of mostly ag financiers, the price has to come down.

Ellis also predicted that the 2010 profit average for the year will be around $50 per head. Although better then 2009’s $25 per loss, he said, “It won’t be enough to turn the beef supply around” in 2011.

Looking farther ahead, Ellis said he expects cattle production in the U.S. will continue to contract until 2014.

During 2011, he expects fed cattle prices will average $$9 to $105 per hundredweight, corn prices to average $5.50 and feeder cattle prices to average $111 to $118 per cwt.

October swine losses

Turning his attention to swine production, Ellis noted that profitability for the rest of 2010 will likely be elusive; but then noted later that 2010 had the opportunity to recoup upward to 60 percent of the large losses in 2009.

Consumer per capita demand is falling off, the same for choice beef cuts, but exports remain strong and he expects foreign demand for U.S. pork to climb.

During October, Iowa swine feeders lost more than $20 per cwt – from $82 in late-September to $59 in late-October.

Looking into 2011, Ellis noted that farrowing intentions are up 0.5 percent from December to February 2011, most of that in Iowa.

With average litter size at 9.81 pigs, he wonders if this is an early indicator of an expanding pig crop.

“The first quarter will tell for sure in 2011,”?he said.

Concerning exports, Japan continues to be the largest purchaser of Iowa pork, followed by Mexico, Canada and Russia.

China’s exports were up in 2010, but Ellis said that it’s not likely to continue, since China has a policy that it must be self-sustaining in pork production in the near future.

“China currently produces six times the amount of pork than the U.S.,”?Ellis said.

Wean-to-finish profitability is possible, Ellis said, from May through August in 2011, although not by much.

He expects those months to see between $40 to $50 per head profit. Considering the wean-finish crush margin at $40 for breakeven, the margin is thin.

After August 2011, the margin falls well below the breakeven by November 2011 and will crawl back close to breakeven by April 2012.

Contact Larry Kershner at (515) 573-2141 or kersh@farm-news.com.