Economy weighing on beef cattle markets
Dec 3, 2008 9:41 AM,
By Blair Fannin
Texas A&M University
It’s a mixed bag when trying to predict the future of the calf and feeder cattle markets, but there may be some good news heading into 2009, according to a Texas AgriLife Extension Service economist.
“We may see (cattle) prices better than 2008 simply because of where we are in supplies,” says David Anderson.
A continued reduction in beef cattle numbers due to dry weather and higher input costs could cause prices to edge higher in 2009, according to Anderson.
For the short-term, recent price swings in cattle futures have been a direct result of a declining stock market. These factors have lowered prices paid in the calf and feeder markets, Anderson said.
“If we go into a deep recession, we could see some more pullback,” he said. “People are eating out less and grocery store spending is going up. We’re seeing that more people are doing more home cooking.”
Stocker cattle operators are using caution as wheat pastures continue to emerge this fall.
“They’re very cautious right now,” Anderson said. “It’s a wait-and-see approach with the current financial state of the economy.”
The livestock industry is currently in a “cost-price squeeze,” Anderson said. Production inputs, which include everything from feed to fuel, are higher than in years past and those costs are incurred throughout the beef-production chain.
“Even though corn (futures) have moved under $4 a bushel, and we’re seeing some retrenchment in feed costs, these are still very high feed costs,” Anderson said. “And we can’t rule out the speculative fund activity which has affected commodity prices. That’s having an effect on the cattle market.”
Anderson said there’s a current tug-of-war going on in the calf market. Tighter supplies are keeping prices higher for calves, but there’s also the high cost of feed. “(With) the state of the economy, calf prices in the spring may be below what we saw this year,” he said. “We still had fairly high prices during the first part of this year. However, I think we will see higher calf prices during the second quarter of next year. What we may see at the end of 2009 may be higher than now due to tighter calf supplies.”
Right now, there’s incentive to market heavier calves to help feeder operators offset high feed costs.
“If you have grass and a way to hang onto those calves, there’s an opportunity there to make more money by holding onto them into next year,” he said.
For the feeder cattle market, Anderson said he also expects to see prices better than 2008 due to reduced supplies.
“And there’s still good demand for beef,” he said, “If prices stay in the 90s (per hundred weight), that’s still better than where we were in the first quarter of 2008.”
Spring 2009 predictions, according to Anderson, could result in 500-600-pound steers averaging $1.05 a pound for No. 1 steers.
Due to declines in wheat prices, Anderson said, there may be more incentive to have stocker cattle graze those pastures and cash in on the weight gain. Weather will play a big factor in determining that outcome, he said.
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