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A lot of red meat, cattle prices pressured, analyst says

Meat supplies will remain large for the remainder of the year,
said
a Purdue University Extension marketing specialist.

"Beef production is expected to be up about 5 percent for the rest of
2006,
while pork production may rise by 3 percent and broiler production by 2
percent," said Chris Hurt. "These supply pressures are expected to keep
finished steer prices about $5 per hundredweight lower than during the
same
period last year."

Hurt's comments came as he reviewed the cattle market, where large meat
supplies coupled with difficulties exporting beef and broilers has led
to
record-large domestic meat supplies in the early part of 2006.

"Feedlot managers remained optimistic in the face of prospects for
weakening finished cattle prices and new concerns about corn and sorghum

prices," he said. "This optimism was reflected in a large increase in
cattle headed to feedlots in March. In fact, the 11.8 million head now
in
feedlots with capacity of 1,000 head or more is estimated by USDA to be
the
largest April 1 number since the current report began in 1996."

First-quarter 2006 beef, pork, and poultry supplies reached a record
21.6
billion pounds, 4 percent higher than last year. Beef production led the

increases in the first quarter, with a 6 percent surge, followed by both

pork and broiler supplies, up by nearly 4 percent.

"For beef, the composition of the 6 percent increase came from a bit
over a
3 percent greater head count which left almost 3 percent due to heavier
marketing weights," he explained. "Export problems for beef and broilers

also meant more meat for domestic consumers.

"Beef exports to Japan were cut off again after an improper shipment of
veal in January. In addition, avian influenza in parts of Europe and
Asia
lowered demand for chicken and resulted in 9 percent less broiler
exports
from the United States in the first quarter. As a result, there was
nearly
5 percent more chicken in the domestic market, which was composed of the
4
percent increase in production and an additional 1 percent in lost
exports."

Hurt said that given all the supply pressure, demand for beef held well
and
prices were not as depressed as for pork and chicken. Finished steer
prices
in the first quarter averaged near $89, about the same as in the first
quarter of 2005. However, by March and April, these prices moved about
$5
to $7 lower than last year as supply pressures have mounted.

"Large beef supplies remain in store for coming months," Hurt said. "In
the
March USDA Cattle on Feed report, on-feed numbers were reported to be up
by
9 percent compared to last year at the same time. There were 939,000
more
cattle in the feedlots on April 1 compared to the same date last year.

"Texas led the way with 320,000 more cattle, followed by Kansas with
250,000 more, and Nebraska with 140,000 additional animals."

All of the 12 major reporting states increased feedlot inventories,
except
for Washington. Placements were up by 5 percent, which was more than the
3
percent increase that was expected prior to the report. Total March
placements were up 87,000 head, led by both Kansas and Nebraska, which
each
increased 35,000 head more than March of 2005.

Lighter-weight calves were popular placements in March as calves
weighing
less than 600 pounds were up 81,000 head, or 27 percent. With some
heifers
still being retained to head back to brood cow herds, the portion of
steer
and steer calves was very high, at 66 percent of all the cattle in
feedlots.

Prices for finished Nebraska steers in the second quarter are expected
to
average in the lower $80s compared to about $88 last year. Third quarter

prices may drop to an average in the mid to high $70s. Last-quarter
prices
should improve some, with prices moving back into the low $80s.

"Cattle feeders are also watching the corn and sorghum markets closely,"

said Hurt. "Concerns about the low planted acreage to these crops,
growing
utilization of corn and sorghum for ethanol, and uneasiness regarding
summer weather are all contributing to increased anxiety about the
potential for higher feed costs from the 2006 crop."

Meat supplies will remain large for the remainder of the year, said a Purdue University Extension marketing specialist.

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