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Good news for beef: Demand is coming back

Agriculture.com Staff 07/06/2010 @ 5:19pm

As goes the general economy, so goes the beef economy. That point was emphasized at the annual Cattle Industry Convention by economists from CattleFax, an industry market analysis firm. CEO Randy Black told beef producers anxiously looking for some good news that the drop in beef demand in 2008 and 2009 took over $140 a head from their pockets. Average fed cattle prices dropped about $10 per hundred pounds in that same time period.

"But we noticed that the drop in demand flattened out in the last half of 2009," he told attendees. "While there might be some further declines in 2010, it won't be as drastic," as the general economy continues to strengthen.

Combined with a continually shrinking beef herd in the country, cattle prices are expected to rebound, perhaps back to a point of profitability in 2010. CattleFax thinks the price of 550-pound steer calves will average between $111 and $113 per hundred pounds in 2010, up from the $107 average of 2009. Highs could peak around $117.

The reason for this is that the beef cow herd continues to shrink in the face of lower demand for beef, and shrinking or nonexistent profits for all industry segments. The USDA Cattle Inventory report says that total cattle numbers as of January 1 were down another 1% from a year ago. The calf crop that will be marketed in 2010 is also down 1%. It makes this the nation's smallest beef herd in almost 50 years.

While that is not good news for beef producers who haven't survived the crunch, it speaks well for those who hung on. "Calf prices have bottomed and are on the verge of a several year uptrend that could see prices climb 20 to 30 cents a pound by 2013 or 2014," CattleFax analysts say.

As for fed steer prices, they expect prices to average $86 to $88 per hundred pounds in 2010, with tops in the mid-$90s. That's up from an average of $83.50 last year. Feeder steers at 750 pounds will average $99 to $101, with tops at $106.

CattleFax also said that excess feeding capacity chasing a smaller available supply of cattle will continue to squeeze margins for feedlots. That will mean cow-calf and stocker operations will benefit from this overbuilt demand.

As goes the general economy, so goes the beef economy. That point was emphasized at the annual Cattle Industry Convention by economists from CattleFax, an industry market analysis firm. CEO Randy Black told beef producers anxiously looking for some good news that the drop in beef demand in 2008 and 2009 took over $140 a head from their pockets. Average fed cattle prices dropped about $10 per hundred pounds in that same time period.

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