CATTLE PRICES BEEFING UP THROUGH THE YEAR 2000

Writer: Marlene Fritz (208/364-4010 in Boise)
Source: Wilson Gray (208/736-3622 in Twin Falls)

IDAHO FALLS, Idaho–With prices rising this year despite record production, fall 1999 and the year 2000 are likely to be profitable times for Idaho beef producers.

Wilson Gray, University of Idaho extension agricultural economist, says higher domestic demand, improved exports and continued low feed prices are all working in favor of cattle operators.

Not only are beef exports up 8 percent on a tonnage basis during the first half of this year–led by resurging markets in Mexico and South Korea–but U.S. consumers are "spending money like water," Gray says.

"Consumers are eating out more and more, and restaurant consumption of high choice and prime beef is very strong," he notes in the university’s Fall 1999 Idaho Agricultural Outlook.

As to whether demand for beef has turned a corner, Gray says "one data point is not enough to draw any conclusions, but more beef has gone through markets this year at higher prices." Indeed, current slaughter cattle prices are in the $69 to $71 range–the first time since October 1997 that fed cattle prices have topped $70.

During the year 2000, Gray expects steers in the 1,100-1,300 pound range to average $70 per cwt., compared to $75 for 700-800 pound steers, $88 for 500-600 pound steers and $95 for 400-500 pound steers.

Declines in beef exports to Japan and Canada during the first half of 1999 were offset by 13 percent increases to Mexico and 290 percent increases to Korea compared with the same months in 1998. Overall, the U.S. remains a net beef importer.

Slippage in pork production, which is expected to be off 2 to 4 percent this fall over last, should help as well by providing some relief from competition.

According to Gray, beef supplies are up 3.1 percent during the first nine months of this year, fueled by a two percent increase in slaughter and a one percent increase in dressed weights. For the year 1999, production is projected at a record 26.2 billion pounds. Heifer slaughter for the January-August period, up 3.5 percent over the same time last year, may set an all-time high, while steer slaughter was 2.5 percent higher but below the 1995 peak.

At 38.3 million head, the mid-year calf inventory is 2 million short of the 1995 high. Gray says fewer-than-expected placements in feedlots and larger than expected marketings in September should buoy prices. So should a tightening supply of feeder cattle if producers decide to retain rather than to slaughter heifers this winter. Potential risks to prices include the chronic uncertainty of beef demand and whether the placements of supply-padding, heavyweight feeder cattle will increase in feedlots.

To boost the numbers of their cattle entering the marketplace during profitable portions of the cattle cycle, Gray says producers traditionally hold back heifers. "Another option would be to buy bred cows this winter to add to the herd or to purchase yearling heifers that are bred and would calve next spring."

The Fall 1999 Idaho Agricultural Outlook is available at length, with supporting tables and graphs, on the web site of the UI Department of Agricultural Economics and Rural Sociology, http://www.uidaho.edu/ag/agecon. Once on the home page, Internet users should click first on Publications, then on the Idaho Agricultural Outlook for October 1999.