Smaller feedyard inventories, fewer placements, good beef demand but less beef production, and expanding export markets all point to continued strong prices for fed cattle into next year.
In its August World Supply and Demand Estimate, USDA forecast slightly lower U.S. beef and total meat production for 2007. The report indicates that cattle slaughter through the end of this year will drop below 2006 levels, and that this year’s smaller calf crop will lead to less beef production again next year. The report also forecasts increases in beef exports to 1.3 trillion pounds for 2007 and 1.7 trillion pounds next year.
An annual survey of Extension agricultural economists also suggests continued strong beef and cattle prices. Ron Plain from the University of Missouri and David Miller of the Iowa Farm Bureau conducted the survey and reported the results at the American Agricultural Economics Association meeting in late July. The composite of economists’ predictions, which is generally quite accurate, shows small year-to-year declines in beef production for 2007 and 2008, and record-high fed-steer prices for both years. On average, the economists project a fed-steer price of $93.77 per hundredweight for the fourth quarter of this year, with $94.13 for the first quarter and $95.17 for the second quarter of 2008.
USDA’s August Cattle on Feed report lists U.S. feedyard inventories as of Aug. 1 at 10.3 million head, down 5 percent from the same date last year. Placements into feedyards during July, at 1.62 million head, dropped 17 percent from those of July 2006. Most of the decline in placements was in the lighter weight categories, following a trend that has been in place for several months. July placements of cattle weighing less than 700 pounds dropped 31 percent from July 2006, while placements weighing more than 700 pounds declined by just 4 percent. Placements in the 800-pound-plus category actually increased slightly over July 2006.
This trend relates to high and volatile corn prices, and is likely to continue through this fall with cattle, on average, shipping to feedyards later and heavier.
Feedyards marketed more cattle than they placed during July, at 2 million head. That total was 3 percent above that of July 2006, but the daily average was down about 2 percent with more slaughter days in July this year. However, University of Nebraska economist Darrell Mark notes that the number of cattle on feed for more than 120 days as of Aug. 1 was down 3 percent from one month earlier and one year earlier, suggesting cattle feeders have stayed current in their marketings.
Cattle feeders also received some good news on the grain front in August, with USDA predicting a 13.1 billion bushel corn crop. The agency projects corn prices for the 2007-2008 marketing year at $2.80 to $3.40 per bushel, with a midpoint of $3.10 per bushel.