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Fewer cattle, higher prices

With fewer cattle supplies, lower feed costs and decent demand, the 2009 fed cattle market outlook is seen as brighter than in 2008.

David Anderson, Texas A&M livestock economist, says fed cattle prices for 2009 will be less than 2008 by about a buck.

For 2009, Anderson sees 1,250- to 1,300-pound steers and heifers averaging $95.00 per hundredweight (CWT), $1.00 higher than the $93.00 to $94.00 average a year ago.

"That is pretty optimistic when you look at the futures prices versus cash," Anderson says. "But, cash basis has been much larger than normal.

"I see beef production down 4% year-over-year in the first quarter of 2009," Anderson says. "If we're going to have less beef production, I think we're going to have higher prices."

For 2009, Anderson sees the U.S. producing 1% less total beef than in 2008.

After a 2006 drought in the southern Plains, a 2007 drought in the U.S. southeast, and a 2008 California drought, the U.S. total cattle herd has been diminishing.

Anderson says higher 2009 prices will be led by fewer cattle numbers, resulting in a smaller supply of beef compared to last year. "We're shrinking the cow herd, we have fewer calves than a year ago, and we have fewer cattle on feed," he says.

On January 1, 2008, the U.S. beef cow herd was estimated at 32.5 million head. To start 2009, that number is seen dropping by 200,000 to 300,000 beef cows, Anderson says.

"As a result, we'll have fewer calves for 2009 and fewer steers and heifers being fed in 2010," Anderson says.

With fewer cattle supplies, lower feed costs and decent demand, the 2009 fed cattle market outlook is seen as brighter than in 2008.

With fewer numbers, the U.S. cattle producer will have less incentive to make the animals smaller for slaughter, he says.

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