Cattlemen should see higher prices in 2010; industry prepares to expand
By CAROL RYAN DUMAS
Economists don't have crystal balls, they rely on numbers, and -- says Wilson Gray, University of Idaho Extension economist -- the numbers point to improvements in beef markets.
"The Jan. 1 inventory report will be out Jan. 29, and we're expecting the beef side to be down 1 percent," he said. "Hopefully, that will be supportive to market prices."
He said he expects an average $5 per hundredweight increase in cattle prices in 2010.
"That will depend a little bit on whether demand picks up a little more," he said.
Gray said cattle prices in 2010 should be in the high $80s to low $90s per hundredweight, compared with the low to mid $80s cattlemen received this year. That's because herd numbers are down.
"We're at some of the lowest numbers we've been in decades," he said. "We'll definitely see numbers shrink a little more in 2010. No one is retaining heifers to expand the beef herd."
On the production side, he said, costs will run pretty close to 2009.
"Forages, hay and silages are relatively reasonable. Corn and soybean are still kind of pricey," he said. "It could keep bids a little lower on cattle they want to place."
It's unknown whether the EPA will raise its blend on ethanol, but the agency said it will delay any announcement until about May. And the corn crop is another unknown.
Snow in the upper Midwest and into the eastern Corn Belt has halted harvest. When farmers can get to the crop, anywhere from a month to four months, the issues will be how much gets in the bin and its quality. That will affect the fed-cattle sector.
Eight to 10 percent of the crop still isn't harvested, which will affect supply and price in the short term. After that, moisture and mold could affect markets, he said.
With the corn coming off with high moisture content, it will have to be fed right away or producers will have to spend more to dry it down for storage.
Depending on the area of the country, cattle producers were at break-even or doing just a little better in 2009, he said. But culling was soft and growers could be waiting to see if prices improve before making their next move.
"Even if they want to expand, it'll be two years down the road. They have to raise up the heifer and it has to have a calf," Gray said. "If they decide to hold onto heifers, it'll decrease the number of animals going into the feed yard."
A cutback in the available supply of feeder cattle would impact total supply, Gray said.
With milk prices improving, dairy cow slaughter isn't likely to affect beef prices in 2010 like it did in 2009.
The USDA's Economic Research Service recently released a report noting 2009's atypically high dairy cow slaughter contributed to beef supplies and downward pressure on beef and cattle prices.