Cattle-Fax Outlook

Cattle producers crowded the room for Friday morning’s Cattle-Fax Outlook Seminar, hoping to hear a favorable forecast for the future. Analysts delivered a generally positive message, with the prediction for continued cow-country drought providing the only negative note.

Forecasters predicted adequate moisture for southwestern and southeastern regions of the U.S., but continued dry conditions coupled with above average summer temperatures for much of the West and Central Plains. The drought area is expected to expand eastward into the Corn Belt.

Dry weather could challenge profit potential for parched producers, but Cattle-Fax analyst Randy Blach foresees opportunities for market-savvy cattlemen to make money during 2003 and coming years.

This year’s corn crop could be big – perhaps 10 billion bushels – but global demand should remain high. The dry weather scare could push prices somewhat higher and every 10 cent per bushel increase could raise fed cattle breakeven prices by 75 cents per hundredweight. Producers were advised to consider managing risk. There is a good chance of higher wheat and soybean prices.

Despite terrorism, animal disease scares and poultry export bans, beef demand has been strong. Net supplies were up and prices reached near-record highs, but demand fostered increased per capita consumer expenditures. Total beef exports grew by seven percent. Despite BSE fears, Japan remained the number one destination for exports. Loss in the Japanese market was made up through increased sales to Mexico and Korea. In the future, Mexico may claim the top spot among buyers of U.S. beef.

According to Blach, 2003 should see beef production fall by one billion pounds, as more heifers are held for breeding and feedlot placements decline. He predicts higher fed cattle prices, averaging $73 to $74, with highs around $80 and a summer dip into the high $60s.
Feeder cattle prices are expected to be $3 to $4 higher, with highs around $80 per hundredweight for 750 lb. steers. Lows of $74 to $75 may be seen during late spring and early summer.
"Calf prices should be good, but moisture definitely could be a factor. There may be lower demand for calves going to early grass," stated Blach. "Look for prices in the upper $90s by fall."
While the recent slaughter cow market has been disappointing, he anticipates a $4 to $5 boost during the coming year, averaging $42 to $45 per hundredweight. Bred cow values will vary by region, but could average $50 per head higher.