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Cattle market rebound should last through fall, economist says

Jeff Caldwell 05/11/2010 @ 9:22am Multimedia Editor for Agriculture.com and Successful Farming magazine.

The recession of the last couple of years is easing. And, as it does, it's helping the cattle market claw out of the hole it was in earlier this year and last year.

Though other factors are in play in the marketplace, the reason for the return to $100-per-hundredweight (CWT) price levels is due mostly to the recovering economy and resulting boost in consumer confidence.

"Beef production in the United States so far this year has been down 1%. A somewhat higher rate of slaughter has been more than offset by lower cattle weights. But there are even more important reasons to explain why cattle prices are so strong," says Purdue University ag economist Chris Hurt. "The result of modestly smaller U.S. production with such strong exports and reduced imports is that first quarter available beef supplies per person in the U.S. were down about 5%."

Consumer demand, though, has risen not just in the U.S. but abroad. U.S. beef exports were up by 24% in January and February of this year, Hurt says. Stateside, retailers have held down beef prices, stirring domestic consumer demand. According to a Purdue report, retail beef prices in the first quarter of 2010 were 10% lower than a year ago. That's not going to last, Hurt says.

"We can expect to see retail prices move back to record high levels, which were $4.46 per pound in the third quarter of 2008," he said. "In fact, it is likely consumer prices will set new high records this summer and fall. Given the still weakly recovering economy, consumer demand may not appear so robust this summer."

Hurt says he expects cattle prices to dip slightly this summer, but generally stay strong strong. He says finished cattle prices will stay peaked through the spring, with summer prices in the low- to mid-$90 range per hundredweight, followed by another peak in the fall.

"The 2010 prices may average about $93, dramatically above the $83 of 2009," Hurt says. "Prospects for 2011 should remain strong as well, perhaps moving upward close to $95 for the year."

The recession of the last couple of years is easing. And, as it does, it's helping the cattle market claw out of the hole it was in earlier this year and last year.

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