IDAHO BEEF IS EXPECTED TO BE A MONEYMAKER THROUGH 2002

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

TWIN FALLS, Idaho–Despite increasing supplies of beef, pork and poultry in the marketplace, strong cattle prices are rewarding producers who were able to hang onto the reins through cyclical lows. Fed-cattle prices in the Pacific Northwest have been pulling steadily forward since May and are ending the second half of 1999 10 percent higher than the year before.

C. Wilson Gray, University of Idaho extension agricultural economist, expects profitability in the cow-calf and feedlot sectors to extend "at least through 2002." Writing in the University of Idaho’s January 2000 Idaho Agricultural Outlook, Gray credits tight supplies of calves and yearlings and moderate feed costs for those healthy returns.

He projects fed-cattle prices to range between $67 and $72 a hundredweight for the first quarter of 2000 and between $66 and $72 during the second quarter. Calf prices should be $87-94 for 500-600 pound feeders during the first quarter and $89-97 during the second quarter. Heavier 600-700 pound feeder calves should bring $70-75 during the first quarter and $71-77 during the second.

For feedlot owners, returns are likely to narrow during 2000 as a dwindling pool of feeder calves forces up bids. According to Gray, feeder supplies are unlikely to increase until 2001 or even 2002, depending on ranchers’ rates of expansion.

"The industry has had four years of declining cowherd and fewer heifers being held back as replacements," he says. "When operators begin to hold heifers for replacement or expansion, feeder supplies will contract even more sharply."

For the past several months, producers have been delivering their calves to feedlots at lower weights. "Lighter weights at placement typically mean lighter finished weights," says Gray. He expects overall beef production in 2000 to decline by 2 to 3 percent.

Despite a 1.9 percent increase in cattle slaughter and a 2.6 percent increase in beef production for 1999, supplies of Choice and higher grades were tight this past year–driving the price spread between Choice and Select from $1.50 last spring to $15 in October. Gray anticipates a $6-9 spread by April 2000.

Consumers are paying 5 cents a pound more for beef at the grocery store and restaurant managers are paying 12 cents a pound more at wholesale, but Americans are buying more beef regardless. According to Gray, domestic consumption was up 1.5 percent in 1999 over 1998. In addition, overall exports are up nearly 8 percent. Beef exports to Japan are off 5 percent, but sales to Mexico--up 12 percent over 1998 for the January-to-October period–are "outstanding" and exports to Korea have rebounded three-fold. Gray says 1999 sales to Korea could exceed 1997’s 262 million pounds.

For 2000, Gray anticipates level exports to Japan and continued rising sales to Korea and Mexico–although tight supplies and higher prices will likely slow the rate of export growth to the latter two nations.

The University of Idaho’s January 2000 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 January 2000. Planning price projections for Idaho commodities can also be found on the home page.