Cattle-Fax Market Outlook

In remarks made Wednesday, Jan. 28, Randy Blach and fellow analysts from the Colorado-based Cattle-Fax market information service said the last 30 days have proven that U.S. beef producers operate in a global marketplace. December’s finding of a BSE-infected cow in the United States closed the doors to important foreign markets and took its toll on cattle prices. Still, the Cattle-Fax team’s long-term outlook was relatively positive.

The obvious bright spot was domestic demand. Consumers remain confident in the safety of U.S. product and analysts predicted increased expenditures for beef in 2004. Aggressive featuring of beef by retailers was expected to aid consumer buying.

Halted exports to Japan, South Korea and Mexico means net beef supplies will be larger than earlier predictions indicated, the analysts said. However, those foreign markets were expected to reopen in 2004. Cattle-Fax anticipated resumed exports to Japan and South Korea during the latter half of the year and with Mexico within the next couple of months.

Exports could rebound quickly, they said, but may not return to previous levels until 2006.

Total U.S. beef production continues to decline, and herd expansion remains slow to start. Some volatility of markets was expected, influenced by carryover beef supplies, slaughter levels and carcass weights. Potentially higher corn prices may pressure prices.

Analysts said fed-cattle margins may be tight, with early-summer prices dipping down near $70, and trending higher in the second half of the year. Fed cattle were expected to average from $76 to $78 during 2004, with a Choice-Select spread of $9-$10. Prices could average in the low $80s by 2005, assuming export markets reopen.

Average prices for 750- to 800-lb. feeder cattle should range from $88 to $90, while 500-lb. steer calves average between $104 and $107.

Cattle-Fax looks for variable profits among summer stocker operators, depending on when cattle are purchased. Cow-calf operators should be profitable during the next three years, but higher corn prices could impact this fall’s calf market.

— by Troy Smith