Declining Supplies of Cattle and Beef
PHOENIX, Ariz. (Jan. 29, 2009) — The economic depression might be dampening America’s spirit, but cattle producers have cause to expect better market prices in the not-too-distant future. During the 2009 Cattle Industry Convention, a Cattle-Fax market analyst said declining cattle numbers and reduced beef production should contribute to a positive long-term price trend.
During his segment of the Cattle-Fax Outlook presentation, Kevin Good said, “In terms of supply, the signs are extremely bullish.”
Good said recent challenges to profitability have created the promise of improvement. With drought reducing carrying capacity in various parts of cow country, and the combined effect of rising input costs and lower calf prices during the last three years, cow-calf producers found themselves in a margin squeeze. In response, they have reduced total cow numbers.
“The total beef cow inventory is down 2% (more than 600,000 head). The decline might slow during 2009 but it’s still going down,” Good said, noting high levels of commercial cow slaughter and lower levels of replacement heifer retention.
The associated smaller calf crop and a predicted reduction in feeder-cattle imports means fewer calves and feeder cattle will be available for feedlot placement. Though it will be offset slightly by an expected increase in carcass weights, total beef production is predicted to decline by 450 million pounds (lb.). In 2009, declining U.S. beef production and growth in beef exports is forecast to outweigh a projected increase in beef imports, putting net beef supplies at 26.6 billion lb. — down by 600 million lb.
Production of competing meats is also declining. The forecast calls for 2009 pork production to drop by 2%, while poultry production dips by 2% to 3%.
In the long run, reduced meat supplies should have a positive effect on cattle prices. In the near term, Good said cattle feeders can expect continued pain, with some relief coming later in the year. He called the profit picture positive for stocker/backgrounder operations, with opportunity for marginal profits in the cow-calf sector.
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