Look Further Ahead, Be Happy

Long-term trend is higher for cattle.

Cattle-Fax financial analysts said Thursday they believe the cattle industry has posted its lows for the year and in coming months should begin to function on prevailing supply-tight market fundamentals.

Analyst Kevin Goode says Cattle-Fax projects annual average fed-cattle prices this year at $90-92, which would be a little below the 92.76 average fed-steer price in 2008.

Goode also said the firm expects 750-pound feeders to average $98-100 and vary from $94-108. He says 550-pound steers should average $108-110 vary from $104-118. Utility slaughter cows should average $54-56 and range $49-62. All these are down slightly from last year's prices.

"The long-term trend is higher," Goode says, "even though we still have some short-term pain."

Using Cattle-Fax profit indexes, Goode expects slight profits for feeders, positive but smaller profits for stocker/backgrounders, and marginal profit opportunities for cow-calf operations.

Much of the long-term good should be set up by shrinking cow numbers and shrinking supplies of competing meats. Goode says net beef supplies by the end of this year could fall to the lowest level since 1988.

Beef, pork and poultry production all will drop in 2009, he says, with poultry taking the biggest hit at 2.5%, pork at 1.9% and beef at 1.2%. Per capita meat consumption will drop, too, but the supply side of the market remains "extremely bullish," Goode says.

On the other hand, the cattle markets are terribly tied to the fluctuations of the stock market right now, Goode adds, and probably won't return to beef market fundamentals right away. Eventually the beef market will begin to do so, however.

Costs will remain fairly high this year, warns analyst Mike Murphy, but not as bad as last year. For example, he projects spot corn futures will average $4.85, and could vary from about $3 to $5, depending on weather and global demand factors.

Exports have declined to some degree, says analyst Brett Stuart, but not that terribly. The dollar strengthened against all other major currencies, excepting the Yen's run-up against dollar in October 2008, and that hurt exports. Hence, poultry, pork and beef all declined. However, the November numbers showed trade levels were close to even with year-earlier exports. Further, Korean exports rose dramatically this year and there is hope Japanese markets may become even more available this year.

Demand should begin to stabilize by 2010 to 2013, says Randy Blach, Cattle-Fax general manager, and we'll start another beef price climb by then. Blach adds that recession appears to have hit bottom and begun the long, slow climb upward.

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