July 22, 2002
MARKETS FACE PERILS, BUT SLOW RECOVERY EXPECTED
Finished cattle prices are expected to make a slow recovery in
the last-half of 2002, following a disappointing performance since
late 2001. On the other hand, feeder cattle are expected to experience
little price increase as a larger calf crop and higher feed prices
offset the potential modest gains in finished cattle prices. Calf
prices are also expected to struggle, with this fall's prices
being nearly $10 per hundredweight below prices in the fall of
In the July
Cattle report, the USDA reported that the total number of cattle
and calves in the country was down only .6 percent. Even with
much lower calf prices and drought conditions in much of the plains
and mountain states, the total number of cows is down only fractionally
and the anticipated calf crop this year is actually up by .3 percent.
Beef cow numbers on July 1 were down .4 percent, but milk cow
numbers were up .5 percent.
indicated that they intend to expand the herd even more as the
number of milk replacement heifers is up 2.8 percent. This reaction,
especially among small and moderate sized producers, reflects
the strong profits last year and, perhaps, the new government
milk price supports,. Beef producers, on the other hand, intend
to keep the size of the breeding herd about the same as beef replacement
heifer numbers were unchanged from last year at this time.
for 2002 is now expected to reach 26.6 billion pounds, a 2 percent
increase from last year. The slaughter rate may finally taper
off a bit in the final quarter of this year, as the number of
market steers and heifers weighing over 500 pounds on July 1 was
down about 2 percent.
weights have plagued the cattle market since last fall, and will
be an important factor in price determination in the coming year.
As an example, in the first-half of this year the number of cattle
marketed was unchanged, but higher weights added 3.6 percent to
the total beef supply. Low priced feed and unfulfilled hopes for
a recovery in finished cattle prices seem to be the explanation.
It is anticipated that weights will remain about 1 to 2 percent
higher this summer, but then drop back closer to unchanged for
the fall and winter as a result of sharply higher feed prices.
in finished cattle prices is expected this fall. Nebraska 1100-1300
pound choice steers averaged only $65.58 in the second quarter
of 2002. The price is expected to improve only about $1 for a
summer average, with prices finally increasing in September. The
fall quarter is expected to see prices recover into the higher
$60s. Some further modest recover can be expected into the first-half
of 2003, with prices averaging near $70 in the first quarter and
in the extremely low $70s in the second quarter. Given normal
seasonal price tendencies, this would mean that prices in late
March or early April could reach the low-to-mid $70s for some
prices are expected to be well below their previous year levels
over the coming 12 months. Lower prices will be a result of a
modestly larger 2002 calf crop, the sluggish recovery in finished
cattle prices, and higher feed and forage prices. Prices for Oklahoma
City steers weighing in the 750 to 800 pound range are expected
to average in the low $80 per hundredweight this summer, but drop
to the very high $70s for the fall. During the first-half of 2003,
prices are expected to be in the mid-to-higher $70s. Prices for
the next 12 months are expected to be about $5 per hundredweight
lower than in the previous 12 months.
feeder cattle will also likely result in lower priced calves over
the next year. Prices for Oklahoma City 500 to 550 pound steers,
as an example, are expected to be in the low $90 per hundredweight
this summer, but drop to the higher $80s in the fall. Prices during
the first-half of 2003 are expected to be in the lower $90s. As
an example of the changed price prospects for brood cow producers,
these calves averaged $98 per hundredweight last fall, but are
expected to be only $88 this fall. Prices for the next 12 months
are expected to be about $9 per hundredweight lower, on average,
than in the previous 12 months. Prices for eastern corn belt calves
at auction markets tend to be $3 to $5 lower than Oklahoma City.
industry has multiple concerns. Grain and protein prices are going
to be sharply higher this fall, with the precise magnitude to
be highly influenced by weather in the next several weeks. Poor
pasture conditions and lack of forage crops in the western plains
and mountain states may also result in further liquidation of
cows and movement of calves to market more quickly than planned.
In addition, there remains uncertainty about how consumers will
respond to the decline in stock values. If they begin to watch
their food budgets more closely, beef demand will be among the
first to suffer.
Issued by Chris