Cattle-Fax Predicts Higher
Cattle Prices Through 2001

SAN ANTONIO — Cattle prices were higher in 2000 and that trend is expected to continue in 2001, according to Cattle-Fax, a Denver-based market information and analysis service. Despite continued declines in total cattle numbers, 2000 beef production was the highest on record. Stronger prices were a result of improving demand for beef, both domestic and abroad, the organization said.

The total cattle inventory on January 1, 2001, was 97.3 million head. This is the fifth consecutive year of declining cattle numbers. The 2000 calf crop totaled 38.6 million head, down 280,000 head from 1999 and the smallest since 1952. Continued drouth over much of the cattle producing area, as well as unfavorable economic conditions until 1999 fueled the decline.

Cattle inventories should begin to level out and grow over the next two years, provided mother nature cooperates so producers can begin restocking and expanding, Cattle-Fax predicted.

The January 1, number of cattle on feed was nearly record-large, one percent above a year earlier, and the largest since 1973. Placements of feeder cattle into feedlots during 2000 were higher in seven out of 12 months than in the previous year, primarily because of good cattle feeding margins during the first half of 2000 and limited grazing opportunities during the summer and fall. Placements of large numbers of lighter weight cattle will likely lead to larger than normal late spring and early summer fed cattle supplies, the organization noted.

Total slaughter for 2001 is expected to decline between 300,000 and 500,000 head, and beef production for the entire year is expected to fall below 2000 levels by about two percent. As feeder cattle supplies tighten through the year, placements into feedlots will slow down, and on-feed numbers will begin to decline and drop below year earlier levels. In addition, average slaughter weights are expected to moderate as lighter cattle are placed on feed. This could be accentuated by any increases in feed grain prices.

Per-capita beef consumption will also decline, since it is directly related to the supply of beef produced. Even though demand has improved and is expected to remain strong, there will simply be less beef available to spread among a growing number of consumers. This trend will continue for the next several years, said the forecast.

During 2001, prices for all classes of cattle are expected to average above those of 2000. Fed cattle prices should average about $74 to $75 cwt., $5 above the previous year. Feeder steers weighing 750 pounds are expected to average about $90 cwt., up $4 from 2000. Steer calves weighing 500 pounds are expected to average about $110 cwt., nearly $6 higher than a year earlier. Cull cow and breeding cattle prices should be higher also. The latter will depend to a large degree on range and pasture conditions.

Competitive meat supplies will remain large in 2001. Poultry supplies are expected to follow a typical increase of two percent annually. Pork supplies will be slightly larger during the first half of 2001, but expansion in the swine industry will increase production about three percent during the last half. Total meat production will be about one percent larger than 2000 levels. Increases in pork and poultry production will likely more than offset any declines in beef production.

Grain prices were relatively low in 2000 and will remain low during 2001, barring weather problems. If corn usage and exports are larger than projected and if crop problems develop during the growing season, grain prices could move higher. Total corn acres planted are expected to decline along with yields due to higher input costs. Both of these factors could lower total corn production and carryover stocks and increase corn prices.

During 2000, cattle feeding was slightly profitable, making about $10 per head. Stocker operators did well and cow-calf producers did significantly better than in 1999. During this phase of the cattle cycle, the cow-calf producer holds the strongest bargaining position and should be profitable, Cattle-Fax pointed out. All other segments are dependent on the calf crop to fill pasture, feedlot and packing plant capacity. Competition for a declining supply of feeder cattle and calves normally results in reduced profits for "margin" operators. This is expected to be the case in 2001 and for the next several years until cattle numbers increase.

Exports of beef are expected to increase about four percent to six percent in 2001 from 2000 levels. Improvements in the Asian markets and Mexico contributed to about a six percent increase in exports in 2000. This trend is expected to continue in 2001. Imports will increase also, due primarily to the higher prices for "manufacturing beef." This accounts for the bulk of the beef imported by the U.S.

The U.S. beef industry continues to undergo significant structural changes as well as changes in marketing. In addition, there will be new advances in technology that may increase production per cow. The beef industry is making tremendous strides in meeting consumer wants and needs through "further processed", branded products and improving consumer and health professional attitudes about the nutritional benefits of beef, the group opined. These are keys to maintaining the recent improvement in demand.