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"Finished cattle prices will end up averaging about $92 this
year, compared with the previous annual high around $87 in
2005," said Chris Hurt. "Price expectations for the final
quarter had been excessive, as cash prices reached $95 in early
September. However, prices have moderated to near $90, and
averages in the final quarter now appear likely to be in the low
to mid-$90s, rather than the higher $90s as anticipated at the
end of the summer." Hurt noted that heavyweight cattle have
moved into feedlots more rapidly in recent weeks, increasing
prospects for larger beef production this winter. In September,
for example, placements of calves weighing over 800 pounds were
up 15 percent, while those weighing 700 pounds or more were up
20 percent.
While on-feed numbers on Oct. 1 were down 3 percent from
year-ago levels, they were up from a 6 percent lower figure on
Sept. 1 and are signaling more rapid movement of cattle into
feedlots in coming months.
"The reason feedlot managers are more comfortable moving
cattle into feedlots is likely related to the relatively strong
finished cattle futures prices and the large corn crop," said
Hurt. "The corn crop, at 13.3 billion bushels, has given
livestock producers increased confidence that sufficient corn
supplies will be available for ethanol, export and domestic
animal feeding.
"While corn prices will be high by historical standards, the
possibilities of extremely high corn prices seem to be reduced
by the large crop and by moderating expectations for corn usage
for ethanol. In addition, large increases in distillers grains
will become available as many new ethanol plants open in coming
months."
Calf and feeder cattle prices have dropped more than finished
cattle prices. Oklahoma City steer calves weighing 500 to 550
pounds dropped from about $128 per hundredweight in early
September to $120 now. October feeder cattle futures experienced
a similar drop, from $119 in early September to $112 currently.
The demand for calves and feeder cattle has weakened somewhat
with the decline in finished cattle futures and with less demand
for calves to be grazed on winter wheat pasture, he noted. With
wheat prices so high this year, wheat producers in the southern
Plains have been less willing to reduce potential yields from
grazing calves.
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"Cattle, in general, are going to remain very profitable to own,"
said Hurt. "While price expectations have been lowered recently,
they have been lowered from extremely high levels. The evidence for
overall favorable cattle prices lies in the small inventories. This
year's calf crop is the smallest in years. Cow slaughter for 2007
has been up 6 percent, and heifer slaughter has been up 3 percent --
both indicators that the breeding herd will drop again in the Jan.
1, 2008, inventory update."
So far in 2007, beef production is up just 0.9 percent, he added.
Fourth-quarter supplies are expected to be down 1 percent and then
up less than 1 percent in 2008. Recovering exports are helping
demand as well. The USDA expects beef exports to grow by 27 percent
in 2007 and by 29 percent in 2008. As a result, domestic per-capita
beef availability will be down by more than 1 percent.
"While domestic supplies of beef will continue to be tight in
2008, there will be more competition from pork and chicken," he
said. "Pork supplies are expected to grow by 3 percent and chicken
by 2 percent. In addition, the beef sector outlook is clouded by an
outlook for slow economic growth, with consumers expected to watch
their food budgets more carefully than in recent years."
Finished cattle prices are expected to average in the $92-to-$95
range in the final quarter of 2007. For 2008, first-quarter prices
are expected to average in a range from $92 to $98, with
second-quarter prices about $1 higher.
"For the entire year of 2008, cattle prices are expected to make
new record highs, averaging $1 or so above this year's $92 average,"
Hurt said. "High prices will eventually encourage expansion of the
cow herd, but that is not expected until at least mid-2008 or even
2009."
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental
Sciences] |
