 "Consumers are beginning to feel a little better about their
household budgets. If they will buy more cars, then surely they
will also be willing to buy more beef," said Chris Hurt, Purdue
University economist.The recession has cut deeply into cattle
producer finances as loss of beef demand has ravaged cattle
prices.
"So far this year, beef production has been down 3 percent,
but finished cattle prices have been down by 10 percent," Hurt
said.
Nebraska finished steers averaged only $82.70 per
hundredweight so far this year, compared with $92.30 for the
same period in 2008. That is nearly $10 per hundredweight lower
prices with a smaller supply. Calf prices have been about $9 per
hundredweight lower this year than last.
Unfortunately, retailers have been slow to reflect these much
lower farm level prices to consumers.
"For the first half of the year, consumers were actually
asked to pay more for beef. Retail prices averaged $4.31 per
pound this year compared to just $4.20 for the first half of
2008. However by June, retailers were finally lowering prices
below year-earlier levels, a move which should help increase
purchases and begin to restore better farm prices," Hurt said.
While most of the lost demand is in the domestic market, the
foreign sector is a modest contributor as well.
"Through May of this year, exports of beef have been up about
3 percent, but imports have risen by 12 percent. More imports
relative to exports means the impacts of trade have contributed
an additional nearly 1 percent to beef supplies in the United
States," Hurt said.
Cattle producers have responded to the depressed cattle
market by continuing to slowly reduce the size of the cow herd.
"Beef cow numbers in USDA's midyear inventory report stood at
32.2 million, a decline of 1 percent. Dairy cow numbers were
down closer to 2 percent. Over the past three years, the beef
cow herd has dropped by 4 percent," Hurt said.
Cheap cattle and high feed prices have discouraged cattle
feeders, too. Placements into feedlots in May and June were down
5 percent for calves weighing under 700 pounds and down 15
percent for cattle 700 pounds and heavier. This has left the
number of cattle on feed at the start of July down 5 percent.
Help for cattle prices should be on the way for several
reasons.
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"Finished cattle prices tend to move upward as the weather cools
late in the summer. Retail prices are coming down, which will
encourage more consumption. Cattle slaughter will remain moderate,
with small supplies coming out of feedlots this fall," Hurt said.
"Competitive pork and poultry supplies will be down 3 percent in
the last half of 2009, and most importantly, consumers are beginning
to see signs of improvement in the general economy and therefore the
beginning of better domestic beef demand," he said.
Finished steer prices averaged $84.50 in the second quarter and
are expected to increase to the mid- to higher $80s into the late
summer.
"The final quarter is expected to see prices that are in the
higher $80s to very low $90s. If the general economy continues to
improve into the spring of 2010 as expected, prices could rise to
the low to mid-$90s," Hurt said.
He says calf and feeder cattle prices will be higher as well,
along with higher finished cattle prices, but with feed price
uncertainty. Prices for steer calves averaged $105 per hundredweight
in the fall of 2008 and should rise to $110 to $120 this fall.
Feeder steers weighing 750 to 800 pounds averaged $94.60 last year
at Oklahoma City. This year they may be $100 to $110.
A more rewarding 2009 calf crop is in store for cow-calf
producers, yet many will still not cover full costs of production.
"Maybe the worst is over, but the cattle industry, like the
general economy, will be slow to recover. Losses have accumulated,
and even though losses won't be as large this fall, profits may
remain elusive until the spring of 2010. Then, maybe the cattle
industry can start to make some hay," Hurt said.
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental
Sciences]
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