The following news release is provided by Cattle-Fax:

Cattle-Fax Predicts Higher Prices For All Classes of Cattle

Cattlemen should expect higher average prices for all classes of cattle during 2003. Tighter fed-cattle supplies and smaller total beef production will drive much of the increase. Cattle feeders and stocker operations are expected to post solid profits during the first half of 2002. This will begin to replace some of the equity lost during 2002 and will underpin demand and prices for feeder cattle and calves.

Cattle feeders lost between $35 and $40/head on average during 2002. This loss of equity will limit price increases for feeder cattle and calves through the first half of the year as margin operators are likely to be more disciplined in their purchasing decisions.

Cattle feeders, stocker operators, backgrounders and cow-calf producers should all experience more consistent and positive profit margins during 2003. Market cow and breeding cattle prices should be higher in 2003. The latter will depend to a large degree on range and pasture conditions. The current drought conditions throughout much of the West and Northern Plains may have a greater impact on prices during 2003 than during 2002.

During 2003, fed-cattle prices should average about  $73- $74 per hundredweight (cwt.), about $6/cwt. higher than the previous year. Feeder steers weighing 750 pounds (lb.) are expected to average about $82/cwt., up $3-$4/cwt. from 2002 due to tight feeder cattle supplies and the profits attained by cattle feeders during the past few months. Steer calves weighing 500 lb. are expected to average about $95-$96/cwt., about  $5/cwt. higher than a year earlier.

Total cattle numbers continued to decline in 2002 but record heavy carcass weights increased beef production to a new record. Lower prices during 2002 were the result of smaller slaughter totals being more than offset by heavier carcass weights, which inflated beef production. Strong demand helped keep record-large production totals moving through the supply chain.

The total cattle inventory on Jan. 1, 2003, was about 96.4 million head, which was nearly even with a year earlier. This was the seventh consecutive year of declining cattle numbers. The 2002 calf crop totaled nearly 38.4 million head, up slightly from 2001. Calf crop totals are not expected to increase appreciably during 2003 and 2004 as drought conditions have impacted reproductive rates during 2002. Additional impacts may occur during 2003 due to the prolonged drought conditions through the West and Northern Plains. Cow numbers aren’t expected to grow until 2004. Continued drought over much of the Western cattle-producing areas has led to relocation of part of the cow herd to areas that have had adequate moisture.

The Jan. 1, 2003, number of cattle on feed was about 12.8 million head, 8% smaller than a year ago. Placements of feeder cattle into feedlots in the seven-state area during 2003 were 360,000 smaller than during 2001 and totaled 20.2 million head. Smaller placements during the second half of 2002 and a reduced carryover total have led to smaller available fed-cattle supplies during the first and second quarters of 2003. Beef production levels are expected to be 4%-5% smaller than a year earlier during this period, which will support fed-cattle prices and allow cattle feeders to gain bargaining position.

Fed-cattle slaughter for 2003 is expected to decline about 600,000 head (2%) to 28.6 million head. Beef production for the year is expected to fall below 2002 levels by about 2%, totaling 26.3 billion lb. Feeder-cattle supplies on Jan. 1, 2003, were slightly larger than a year earlier. Placements into feedlots during the first quarter are expected to be larger than a year earlier and will likely lead to large third- and fourth-quarter beef production totals.

Per-capita beef consumption will decline to 65 lb. in 2003 and is expected to be about 3 lb. smaller than per-capita consumption during 2002. Even though demand has improved during the past several years 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 until herd expansion gains enough momentum to grow feeder cattle and calf supplies and resulting beef production.

Competitive meat supplies during 2003 are expected to be mixed, with pork supplies declining 1%-2% and poultry supplies increasing about 2%. Total meat supplies during 2003, as a result, are expected to be even-to-slightly smaller than those of 2002.

Grain prices were volatile during 2002 and are expected to remain so during 2003. There is always weather risk associated with corn prices. This is especially true this year as U.S. ending stocks are the smallest since the 1996-97 crop year. Total corn acres planted are expected to increase but good growing conditions will be needed to attain high enough yields to produce a crop approaching or exceeding 10 billion bushels (bu.).

Beef exports are expected to increase by 5%-7% in 2003 from 2002 levels. If this level of growth is attained, 2003 beef exports could be record-large. The continued fallout of the BSE discovery in Japan will impact U.S. beef export tonnage through at least the first half of 2003. Korea and Mexico are expected to remain growth opportunities for the U.S. beef industry. Imports will increase slightly, due primarily to the higher prices for lean trimmings and smaller domestic beef production. Trimmings account for the majority of beef imported by the United States.

Beef demand is expected to improve slightly during 2003 compared to 2002. It isn’t expected to exceed the record demand of 2001, but the improvement should support prices for beef and all classes of cattle.

Cattle-Fax is a member-owned and member-directed market information, analysis, research and educational service organization, serving beef producers in all segments of the industry. A subsidiary, CF Resources, provides research services, educational programs and economic data for agribusiness companies serving the beef industry.