OU 368

November 25, 2002

Winter Beef Cattle Outlook
P.J. Rathwell, Extension Ag Economist

Despite continued record beef and total meat production in the US, slaughter cattle prices have continued to strengthen over the fall of 2002.  Cash slaughter cattle prices are now forecast to rise above $70 by late fall of this year and are likely to remain in the $70’s during the first half of 2003.  And, if winter weather affects feeding conditions in the Southern Plains slaughter cattle prices could rise into the upper $70’s this coming winter and spring.

A key component of the outlook for the winter of 2003 is the number of cattle already in feedlots.  Since April placements have been below the levels seen in the past two years with the exception of the months of August and September.  Placement numbers in these two months were marginally larger that 2001 levels.  In total, there are fewer cattle in the feedlots today compared to 2001 and 2000.  This is good news for cattle producers. 

Since January of 2001 we have had a net reduction in feedlot cattle of 824,000 head (at a finished carcass weight of 832 pounds this is a reduction of 685,568,000 pounds of beef----not on the market—an approximate reduction of 2.6 percent in total annual beef production).  The trend toward fewer cattle in feedlots is expected to continue into March and April of 2003 where cattle-on-feed numbers are projected to be 5 percent below 2002 levels.

Cattle slaughter while up substantially in most of 2002 is expected to decline this fall, the result of smaller feedlot placement numbers this past summer.  And fed cattle marketing weights look like they are starting their normal seasonal decline.  The result should be smaller beef production than last year by late fall 2002.  Projections are for this reduction in beef production to continue through the first half of 2003.

Beef demand has continued to support cattle prices.  This has been very important to the cattle industry given the record beef production levels in 2002.  While it has not necessarily guaranteed industry profits, its continued strength has kept supplies moving through the production channel at a record pace and has helped clean up fed cattle supplies.  Cattle Fax has developed some interesting information on this point.  From 1966 through 1998 third quarter net beef supplies averaged 6.6 billion pounds and wholesale beef prices averaged $98.36/cwt.  During the third quarter of 2002, beef supplies grew 12% versus the 1996-1998 average period and wholesale beef prices increased 9%. 

Beef exports are also improving after large declines due to BSE and related scares.  During August, total beef exports rose 12% above last year’s level.  Continued growth in beef exports to Mexico and South Korea are responsible for much of this increase in exports.  Japanese exports are still down but improving.

The long term meat export outlook is still conditional upon the possibility of a port strike on the West Coast.  President Bush invoked a cooling off period but the longer-term issues have not been resolved between shippers and dockworkers.  There still remains a possibility of another work stoppage in early 2003.

Total cattle imports are down 8% from last year.  Feeder cattle imports from Mexico have fallen 39% compared to 2001 levels.  This reduction in feeder cattle imports (300,000 head) has certainly cut feeder cattle availability to US feedlots and helped support domestic feeder cattle prices.  The trend appears to be continuing with smaller placements of Mexican cattle on pastures and in feedlots this fall.  Canadian cattle imports have increased in 2002.  Imports of cattle from Canada are up nearly 165,000 head.  On balance, though, cattle imports are down.

Feeder cattle (700-850 pound steers) prices are being supported by the continued strength in the live cattle market.  Higher future market prices have helped feedlots return to profitability and this has supported feeder cattle prices.  These prices should continue through most of the winter until wheat pasture calves entering feedlots in February and March pressure the market. 

Good wheat pasture conditions have also helped strengthen the lightweight market Figure 1).  Calf prices (400-500 lbs) in the Carolinas have increased $7 per cwt over the last few weeks.  Limited supplies of calves should help sustain this trend through the end of 2002 and into the first quarter of 2003.

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updated 12/12/02