Longhorn heifers graze in the Sierra foothills of California. USDA is stocking a new bank with vaccine for foot-and-mouth disease.

Tighter beef supplies, lower feed costs bode well for producers


Capital Press

There are better prospects ahead for U.S. cattle producers even though the U.S. and world economies appear to be in only moderate recovery, with complete recovery three to five years away.

That's according to a 2010 outlook released by the University of Idaho in collaboration with USDA and the Livestock Marketing Information Center.

"The beef herd keeps shrinking, so supplies keep getting a little tighter," said Wilson Gray, livestock economist with the University of Idaho and an author of the report. "That's putting a little support back into beef prices. It'll be at least a couple of years until we see any increase in the beef herd."

USDA predicts higher fed cattle prices each year for the next nine years with prices for slaughter steers averaging slightly above $100 per hundredweight on a live basis in 2019. The agency expects the cattle inventory to bottom out in 2011 and then expand slowly.

On a quarterly basis, lower beef production is forecast to support year-to-year increases in prices of all cattle classes. Higher fed-cattle prices should set the stage for increased calf and yearling prices, if corn prices don't surge again.

Further helping prices is that weather challenges in the Plains states and the upper Midwest this winter lowered carcass weights. There are fewer cattle on feed and fewer replacement heifers, Gray said.

The Livestock Marketing Center's forecasts for 2010 set U.S. beef production 2 to 3 percent below 2009. Annual average fed cattle prices in 2010 are forecast to average about 6 percent above a year ago while 700- to 800-pound steers increase about 5 to 7 percent. The price forecast for 500- to 600-pound steer calves could average 4 to 9 percent above 2009.

Seasonally, fed-cattle prices are forecast to pull back from spring highs this summer as beef production posts much smaller year-to-year declines. Then, fed-cattle prices are likely to climb again in the fourth quarter of the year.

For the first six weeks of 2010, the fed-steer price averaged $4.33 per hundredweight above a year ago. For that same period, in the Southern Plains, 700- to 800-pound steers were up about $3 a hundredweight, and 500- to 600-pound steers were up about $1.50 a hundredweight.

"In recent weeks, year-to-year increases in cattle prices have generally been growing," the report stated.

"There's a little more optimism when you talk to cattlemen," Gray said. "And prices should be 5 to 10 percent higher on calves next fall than we saw in 2009."

Calf prices at weaning time in the fall are expected mostly $5 to $14 a hundredweight above last year's rather depressed levels.

Adding to the positive outlook are softening feed costs.

Cost of gain should not be a big problem if USDA's corn price forecast is right. That forecast is that annual corn prices will stay between $3.50 and $4 per bushel for the next decade. But producers should expect some volatility.

For 2010, USDA projects the average price of corn at $3.45 to $3.75 per bushel and soybean meal at $280 to $310 per ton. That's down substantially from $4.06 a bushel for corn and $331 per ton for soybean meal posted last year.

For several more months, hay prices are forecast to remain below a year ago, however new-crop production in 2010 is forecast to decline and may pull hay prices above a year ago as summer progresses.

Report online

Price History and 2010 Outlook for PNW Livestock Prices by C. Wilson Gray, James Robb, Erica Rosa:

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