"Feeder cattle prices in the higher
$80s to low $90s are expected -- $6 to $8 higher than last fall,"
said Chris Hurt. "Prices for 500- to 550-pound steer calves will
likely move into the high $90s to low $100s, about $8 to $10 higher
than last fall."
Hurt's comments came as he reviewed the
cattle market. Declining beef and dairy cow herds will result in
beef supplies being down at least 2 to 3 percent for the remainder
of 2003 and throughout 2004, he noted.
"Some retention of beef heifers can be
expected to begin in the next 12 months as drought in the Plains
abates," he said. "While a strengthening U.S. economy should assist
the strong price outlook, opening the border with Canada provides a
threat that could dampen prices by $2 to $4 per live hundredweight
for several months and also may be depressing deferred futures
prices due to the uncertainty of when the border will be opened."
The long decline in beef cow numbers
has been extended into the eighth year as numbers dropped to 33.6
million, a slight decrease from last year at this time but 7 percent
lower than the last peak in 1995. The brood cow cycle, which
encompasses a period of rising then falling numbers, has now spanned
14 years, dating back to 1989. Reductions in beef cow numbers have
primarily been as a result of drought conditions in the Rocky
Mountain and western Great Plains regions.
"This drought has been easing, however,
this spring and summer, at least for the western Great Plains," said
Hurt. "As of July 1, producers were retaining the same number of
beef replacement heifers as last year, indicating a fairly stable
cow herd over the coming year."
Milk cow numbers were down 1 percent
from last year after heavy dairy cow slaughter in the first five
months of this year as a result of large financial losses in milk
production. Producers are withholding 3 percent fewer replacement
heifers, indicating a continued drop in dairy numbers in the last
half of 2003 and into 2004.
The 2003 calf crop is now estimated at
38 million, a reduction of 1 percent from last year's crop. The
number of cattle on feed in lots of 1,000 head or more was down a
total of 5 percent. Marketings remained higher than expected, at 8
percent greater than last June.
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"Beef production so far this year has
been down 4 percent, primarily as a result of lighter marketing
weights," said Hurt. "The lighter marketing weights have been
stimulated by both high feed prices due to last year's reduced
yields and advanced marketings as feedlot managers pulled cattle
forward to take advantage of the strong spring and early summer
For the remainder of the year, beef
production is expected to continue to be sharply reduced, given the
small inventories in feedlots. However, weights are likely to
increase with cheaper feed this fall. In addition, some retention of
heifers could begin in the next year, especially if the drought in
the Plains states continues to ease.
"Additional heifer retention has the
impact of further reducing the beef supply," said Hurt. "In the last
half of this year, beef supplies are expected to drop by 3 to 4
percent. The larger decreases could come late in the year. For the
first half of 2004, supplies are expected to remain lower by about 3
In recent years, Hurt noted, small
changes in beef supplies have had large impacts on finished cattle
prices. For example, in 2003, supplies are expected to be down about
2 percent, yet prices will be up about 13 percent, averaging near
$76 for the year. Also favoring strong cattle prices are
expectations for faster growth rates in the United States and
international economies, which help stimulate additional beef
"Finished cattle prices have remained
quite strong this summer," Hurt said. "Some decrease can be expected
into the late summer, but that likely will only be into the low
$70s. Prices should rally back into the higher $70s this fall before
moving above $80 by very late 2003 or early in 2004. Spring highs
are expected to be in the lower to mid-$80s."
Hurt added that one of the bearish
factors now overhanging the cattle market is the issue of when the
Canadian beef import ban will be lifted.
will be negotiated between the U.S. and Canadian governments, but
given current information, it is likely that it will be lifted
before the end of 2003," he said. "Large stocks of frozen beef have
been stockpiled in Canada, and the release will be a
price-depressing factor, much as the restriction of trade has been a
price-enhancing factor this spring and summer."
of Illinois news release]