NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665
June 15, 2000
The U.S. cattle inventory is expected to continue declining through this year and reach a cyclical low point in 2001, according to the latest Livestock Outlook produced by USDA's Economic Research Service. USDA analysts predict that cattle numbers will begin growing in 2002, but beef production will not start increasing until 2003.
"This lag in increased production is due to fewer heifers going into feedlots as the rebuilding of the cow herd gets under way," says Dwight Aakre, extension farm management specialist at NDSU. "This means a declining number of cattle on feed until the larger calf crops appear in 2002 and 2003."
Feedlot operators currently are placing record numbers of heifers on feed and consequently heifer slaughter volume remains historically high, Aakre says. USDA analysts are projecting beef production in 2001 to decline by 4 to 5 percent from this year's near-record production based on their assumption that producers will begin retaining heifers to expand cow herd numbers.
For cow-calf producers, this means stronger calf prices for the 2000 and 2001 calves. Aakre says calf prices are likely to level off in 2002.
"When calf prices will begin retreating depends not only on the size of the calf crop but also on the price for slaughter animals, as well as the cost of gain," Aakre explains.
Cost of gain is predominately a factor of the price of feed. Current feed prices are favorable for livestock feeding and should remain so for the next two years, Aakre says.
The price received for slaughter animals is affected by the quantity of beef production, quantity of competing meats, exports and imports, and the health of the economy and consumer confidence. Fed cattle prices are expected to average from $70 to $75 per hundredweight in 2001, the highest level since the early 1990s, Aakre says.
"Fed cattle prices could go even higher if the economy and consumer confidence remain strong," Aakre says. "Yearling feeder cattle prices are likely to challenge the 1990 record of $88.27 per hundredweight."
Prices in May for heavy Choice beef boxes approached 1993's record $128.60 per hundredweight before declining near month's end, Aakre says. Prices for Choice beef at retail stores reached a record $3.05 a pound, on average, in April and marked the beginning of a generally higher price pattern, signaling the declining beef-supply phase of the current cattle cycle.
"If heifer retention begins this summer, fed cattle inventories will begin to decline and are likely to continue declining for the next couple of years," Aakre concludes. "Declining supplies will bring more record prices. Lower pork supplies are also contributing to higher beef prices, and increases in pork supplies are not likely until the second half of 2001."
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Source: Dwight Aakre (701) 231-7378
Editor: Dean Hulse (701) 231-6136