Ramsey County Ag Column

By Bill Hodous

January 14, 2008

Howdy!!!

I have included in my column, bits of Tim Petry’s (NDSU Beef Economist) cattle outlook for the coming year. 

We have already noticed a slide in the cattle market with these higher corn prices and like Tim says below if corn continues higher the slide in the feeder market could continue.  The bred cow market has continued holding its own and with uncertain weather patterns for the summer could very well hold.  Pasture conditions will dictate how well the bred cow market will hold.  Right now looks good for both.  Well enough for me rambling and onto Tims’ comments.Cattle price volatility will continue in 2008. However, each market class of cattle has unique fundamental factors that will affect the price level and the degree of volatility.  A major factor that will continue to affect calf and yearling prices is the price of corn. Cash corn prices in the northern Plains averaged about $1.20 per bushel higher in 2007 ($3.50) than 2006 ($2.30). A rule of thumb is that a 10- cent-per-bushel change in corn prices causes a $1-per-hundredweight (cwt) change in the opposite direction in feeder calf prices. Corn prices experienced much volatility in 2007 and may be even more volatile in 2008. Increasing demand for corn for ethanol production and the competition for planted acres from soybeans, wheat and other crops is fueling price swings. Planted acres of corn increased from 78.3 million acres in 2006 to 93.6 million in 2007. However, with the relatively high current prices for wheat and soybeans, corn acreage is expected to decline in 2008. As reports about expected plantings and weather conditions in the Corn Belt, as well as other countries, are released, the grain and oilseed markets will be volatile. The USDA Prospective Plantings report will be released on March 31, but several private forecasts will come out before that. Beef production in 2008 will be close to 2007 levels, so price volatility will come from the demand side. A general weakness in the U.S. economy, high pork and chicken production and uncertainty in the beef export market will affect prices. Cow prices also had a roller coaster ride in 2007. Prices started the year in the mid-$40s, climbed to the mid-$50s during the summer and plummeted back to the mid $40s during September and October as competing chicken prices fell, hamburger was recalled in the retail market and the slaughtering of cows increased both seasonally and because of the drought in the southeastern part of the U.S.  Cow prices should be relatively high again  in 2008 as long as widespread drought does not materialize, but again could  experience large seasonal swings.

Volatility in both livestock and crop prices may be frustrating to some, but along with it may come some excellent marketing opportunities. There are several price risk management tools available to cattle producers, which should be considered when marketing plans for 2008 are developed.

524 4th Ave #5, 2nd Floor Ramsey County Courthouse
Devils Lake  ND  58301
701-662-7027
email - ramsey@ndsuext.nodak.edu