Forecast: Cattle Prices to Remain Strong

Scott Brown, livestock economist from the University of Missouri, recently told a group of cattlemen that cattle prices will be robust, if somewhat lower, through the coming year.

“If I had been here nine months ago and told you that fed cattle prices would average 99 cents a pound in the fourth quarter of this year, you would have run me out of the county,” Brown said.

Prices paid for finished steers on the Nebraska Direct Market will end the year up more than 37 percent from the fourth quarter last year, according to an estimate by the University of Missouri Food and Agricultural Policy Research Institute (FAPRI).

The projection shows fed cattle prices of $81 per hundredweight for the fourth quarter of 2004. While that is a 14 percent decline from this year, the price will be well above long-run averages.

Closing the border to Canadian beef and cattle imports plays only a part in the boost in beef prices, said Brown.

U.S. beef continues in short supply, especially the Choice and Prime cuts. If you can produce quality beef, you will be well paid, Brown said.

While Canada is part of the story, the continuing consumer demand is a strong force in prices. For example, steak that averaged $4.50 per pound in the grocery store from 1997 to 2001 now averages $6 per pound, Brown said.

That is a marked change from earlier in the cattle cycle when demand lagged and prices were sluggish.

Nationally, the cow herd continues to decline. That will extend this cattle cycle into the 14th year, one of the longest on record. As the herd shrinks, beef supplies will remain short and prices will be high.

A map of the United States shows a marked drop in cattle numbers in the drought-stricken Western states. However, Missouri cattlemen increased the state beef herd by 56,000 head last year, according to the latest cattle inventory.

That put Missourians in position to cash in on the beef-price surge. Brown said that trend should continue, giving more optimism to the price outlook for Missouri producers.

The current cattle price trend could turn down quickly if consumers burn out on beef and switch to cheaper buys of pork and chicken. Also clouding the outlook are higher prices for corn and sharply higher prices for soybean meal, the main ingredients in cattle finishing rations.

“So far there has been no red ink for the producer, feeder, packer or retailer, with all making money in the current market,” Brown said. “I don’t expect to see cattle prices slow down until we begin to see red ink somewhere along the line.”

Brown gave an optimistic price outlook for feeder calves.

The 600 to 650-pound feeder steers should average $103 per hundredweight this quarter. FAPRI projects prices next fall at $96.25, with a year average of $97.13  per hundred for the heavy calves.

“If you’re thinking of adding a few more cows, it should pay off,” Brown said.