|
"Cattle prices have been on a roll in recent months," said Chris
Hurt, who added that the industry's past difficulties seemed to
have paved the way for the current optimism.
"The cattle
industry has been through a lot in recent years, including BSE,
restricted imports, multiyear droughts in Western states,
drought in the Southeast in 2007 and fears of corn prices going
above $4 per bushel," he explained. "It's no wonder cow-calf
producers have leaned more to liquidation than expansion."
Yet, the price prospects appear good. In the first half of
2007, per capita beef production was down about 1 percent, yet
finished cattle prices were up 9 percent. Positive price signals
are part of the outlook as well, including smaller per capita
beef supplies over the next 12 months, a beef breeding herd that
is headed downward and strong domestic demand.
"It now appears that 2007 will provide record-high finished
cattle prices, averaging near $92 per hundredweight," said Hurt.
"Brood cow producers will also be pleasantly surprised by
near-record calf prices this fall and winter, as both the
optimism of finished cattle prices and the recent sharp drop in
corn prices are reflected in upward adjustments to calf prices."
The numbers in the just-released USDA semiannual Cattle
Inventory and monthly Cattle on Feed reports reinforce the
optimism. The total number of cattle and calves on July 1, at
104.8 million head, is down slightly from year-previous levels.
Beef cow numbers were down 0.4 percent.
"While this is a modest reduction, it indicates that cow-calf
producers have put the expansion phase of the cattle cycle on
hold," said Hurt. "Beef cow numbers reached a low in 2004 and
expanded a small amount in 2005 and 2006. The reduction of
100,000 beef cows in the last 12 months now puts numbers back
near the lows of 2004.
"Just as importantly, producers are indicating that they do
not intend to expand the herd in coming months, as there is
currently a 6 percent reduction in the number of beef
replacement heifers being held to go back into breeding herds."
The number of cattle placed on feed in June was down 15
percent, and below pre-report estimates. Placements of cattle
weighing less than 700 pounds were down 27 percent. Even those
weighing 700 pounds or more were down about 3 percent.
"While beef cow producers have been pointing to smaller
numbers, dairy producers are thinking bigger, as milk prices
moved from under $15 per hundredweight at the start of the year
to over $20 this summer," he noted. "Milk cow numbers, at 9.15
million head, are unchanged from year-ago numbers, but the
number of dairy heifers being retained to go back into the herd
is up 100,000 head, or nearly 3 percent."
[to top of second column] |
 Beef supplies for the next 12 months are expected to be somewhat
lower than in the same period one year earlier. With population
growth, this means per capita supplies will actually be down and
provide a basis for strong finished cattle prices. Nebraska-finished
steers are expected to average in the $88-to-$92 range in the summer
quarter.
"Prices for the last quarter are expected to be higher, in the
$90-to-$95 range," Hurt said. "For 2008, first-quarter prices may
fall in a range from $92 to $96, with the second quarter stretching
to $94 to $98.
"While these are very strong prices, live cattle futures prices
are even more optimistic. If these forecasts are valid, 2007 will be
a record-high cattle price year, exceeding by more than $4 per
hundredweight the previous record year, in 2005, when Nebraska
steers averaged $87.28."
Feeder cattle and calf prices will feel the upward price impacts
of strong finished cattle prices and more moderated corn prices.
Feeder steers weighing 750 to 800 pounds are expected to average in
the $110-to-$115 range this fall.
"Calf prices will be much more encouraging to cow-calf producers
than had been expected," he said. "Last fall and winter,
500-550-pound steer calves averaged about $120 per hundredweight at
Oklahoma City. For this fall and winter, those prices are now
expected to be in the $130-to-$135 range. Eastern Corn Belt calves
tend to be about $3 to $5 lower."
With the brighter outlook, the cattle industry will begin to
rethink its current "smaller is better" strategy, he projected.
"Finished cattle weights will likely move higher, calves will
begin to flood into the feedlots, and cow-calf producers will begin
to think about retaining some of those heifer calves rather than
sending them to market," he said.
"The industry has been through so much in recent years, so maybe
the first thing to do is just enjoy the improved prospects for a
bit."
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental
Sciences]
|
