Volume VII Number 2 March/April 1999

Smaller Beef Supplies Indicate Improved Prices for Cattlemen in 1999





"Smaller beef supplies should result in improved prices for producers and cattle feeders in 1999. The anticipated decline in beef production is a result of declines in total cattle numbers from a cattle-cycle peak in 1996 of 103.5 million head, to 98.5 million head on January 1,1999," said Topper Thorpe, executive vice president of Cattle-Fax.

"Cattle numbers are expected to decline slightly again in 1999," Thorpe noted. "Smaller cattle supplies will result in declining beef production for the next several years. This is normally accompanied by higher prices," according to a Cattle-Fax news release.

Thorpe and other Cattle-Fax analysts outlined the beef industry situation and outlook in presentations during their annual Outlook Seminar at the 1999 National Cattlemen's Beef Association convention in Charlotte, NC.

"1998 was a reminder that global trade, competing meat supplies and weather are still major factors influencing cattle prices," Thorpe pointed out. "Beef supplies were larger than anticipated; a severe drought affected Texas and surrounding states; declines in the value of foreign currencies compared to the dollar stimulated imports and hampered exports; and pork production increased sharply through the year. This combination resulted in lower-than anticipated cattle prices and significant losses for cattle producers and feeders during 1998."

Beef supplies are expected to decline about four percent in 1999. Total cattle slaughter is expected to decline about three to four percent or about one million head.

Cattle-Fax projects average annual prices at about $66 per cwt for fed cattle in 1999; $73 to $74 per cwt for feeder steers weighing from 700 to 800 pounds; and $88 to $90 cwt for calves weighing about 500 lbs.

To achieve these price levels, analysts explained, the following must happen:

  • The cattle-feeding industry must get current in its marketing during the year, and average weights of fed cattle must decline from 1998 levels;

  • Competing meat supplies must not increase dramatically; and

  • Exports of beef and beef by-products and competitive meats at 1998 levels or above are critical for improvement in domestic prices.

Feed*Lot Magazine requested Jim Gill, Market Director for Texas Cattle Feeders Association, to supply us with graphs showing U.S. steer dressed weights for 1996 through 1998 and average dressed weights- steer for 1992-1996, 1997 and 1998. These graphs show greater weights across the board when compared with both 1997 and 1996 weight statistics.

The beef industry still faces relatively large supplies of fed cattle through the first quarter of 1999, with some decline anticipated in the second quarter, according to Cattle-Fax. In addition, fed-cattle weights remain above average and above year-ago levels. Pork supplies will remain large through the first half of 1999.

Total cattle-on-feed numbers are below year-ago levels, pointing to declining supplies in the second quarter. However, price improvement will occur only if the feeding industry is current and there is some reduction in average slaughter weights. Average prices for fed cattle are expected to be lower during the first half of the year than in the second half.

All segments of the industry should fare better than in 1998, with an opportunity to begin recouping some of the losses sustained in 1998.

Cattle-Fax is a member-owned information, analysis, research and educational organization serving cattle operators in all segments of the industry. A subsidiary of CF Resources, provides special research services, educational programs and analyzes data for members and for agribusiness companies serving the cattle industry.
 








  

   
   

   


   

   		
  
   



  

    



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