2008 has been a challenging and rather exasperating year for cattle producers and nearly everyone else in the economy, says Derrell Peel, Oklahoma State University Extension livestock marketing specialist.
“Profitability was scarce for most sectors of the cattle industry as input prices and output prices in turn limited returns. The first half of the year was mostly characterized by sharply higher input prices as feed, energy and fertilizer prices all soared to record levels driven by growing demand and uncertainty,” he says. “The second half of the year saw the precipitous drop of the U.S. economy led by the collapse of the artificially inflated home-mortgage sector and the resulting domino effect on general consumer spending and business retrenchment.”
For cattle producers, the positive effect of decreasing input prices late in the year was equaled or exceeded by the decrease in output prices and the collapse of feeder- and live-cattle futures prices, Peel says.
It seems most everyone is ready to close the books on 2008 and move on to a new year. Consumer holiday spending will be the final measure of just how bad a year 2008 was.
“While there’s no guarantee 2009 will be better, there are some positive signs for the economy and the cattle industry,” Peel says. “It appears the stock market has stabilized into a trading range, albeit a wide one due to volatility. This at least provides a base from which to launch economic recovery.
“The Federal Reserve has pumped tremendous amounts of money into the economy, so far with little effect. The increase in the money supply has been matched by a decrease in the rate of money turnover in the economy as lenders have been reluctant to lend and consumers and businesses are reluctant to borrow. Eventually, this decreased velocity of money should return to more normal levels and the economy will be poised for a big economic stimulus,” he says.
Likewise, there are a number of positive cattle-market factors that will set the stage for 2009 markets.
“Tight feeder- and fed-cattle supplies will help support cattle prices, especially in the first half of the year. Decreased beef production along with reductions in pork and poultry production will support the meat complex in 2009. Uncertainty and risk will continue with many markets expected to remain volatile but, baring a new round of macroeconomic weakness, consumer demand should stabilize and offer some chance for profitable margins for beef sectors,” he adds.
According to Peel, beef trade is expected to continue as a positive factor but exchange-rate volatility contributes to the uncertainty of beef product and by-product trade.
“2009 will be a new year and hopefully it will bring a new perspective as markets move forward and past the rollercoaster that was much of 2008,” Peel concludes.