Cattle feeders enter the new year with a strong market and high hopes. Last year turned out much better than anyone expected with beef demand boosting fed-cattle prices clear through a period of record production. With supplies tightening this year and demand continuing to improve, prices will average higher than those seen during 2000.

One possible cloud on the horizon-a slowing economy-could threaten the beef market over the next year. High employment rates and strong earnings helped fuel the recent upturn in beef demand. A loss of consumer confidence, timed with supply related beef-price increases, could push some consumers to turn back to competing meats.

Jim Gill, market director for the Texas Cattle Feeders Association, says 2001 beef production will total about 26 billion pounds, 3.1 percent below 2000. This, he says, will be the first decrease in beef production since 1993. Part of the reduction will result from a smaller cattle inventory, but carcass weights also will play a significant role. Carcass weights averaged a record 745 pounds during 2000, but that number should drop off through this year, mainly due to lighter placement weights. Data from Iowa State University show that during the second half of 2000 placements of cattle weighing more than 800 pounds dropped 13 percent behind year-earlier figures. During the same period, feedyards posted a 10.6 percent year-to-year increase in placements of cattle weighing less than 600 pounds. Calf feds typically finish at considerably lighter weights than cattle placed as yearlings.

The export market helped support beef prices over the past year and should remain strong. The U.S. Department of Agriculture reports beef exports for January through September 2000 increased by 9.1 percent over the same period during 1999. Exports to Japan increased by 4 percent, Mexico by 17 percent and South Korea by 39 percent.

Growing supplies of pork and poultry will provide strong competition in the meat case during the next year. That growth, however, will be modest compared with some previous years. Poultry production continued to grow in 2000, according to the Livestock Marketing Information Center, but the increase in U.S. production was just 2 percent, compared with an average annual increase of nearly 5 percent through-out the 1990s. Industry forecasts for 2001 put broiler production 2 percent above 2000.

On the pork side, LMIC reports that sow slaughter in 2000 will be well below 1999's.

Smaller slaughter numbers, however, do not necessarily mean that hog producers are engaged in rapid expansion. Breeding herds started the year at historically low numbers, and sow slaughter as a percentage of the breeding herd has remained within the normal range. Analysts expect sow numbers and hog slaughter to increase this year, but pork production will remain below the high levels posted in 1997.

At TCFA, Mr. Gill estimates fed cattle will sell from $72 to $78 per hundredweight during the first quarter of 2001; $70 to $75 in the second quarter; $68 to $72 in the third quarter; and $76 to $80 in the fourth.