“This past year is probably one that most cattlemen are glad to have over and I am sure they are looking for better things in 2010,” says Dillon Feutz, Utah State University Extension economist. “After averaging near $93/cwt. for fed cattle in 2007 and 2008, prices declined to only average $83 in 2009. A disastrous 2008, where feedlots lost on average over $100/head, was followed by only a slightly less disastrous 2009 where my model predicts feedlots lost about $85/head.”
The cow-calf industry didn't fare much better this past year. Winter hay feeding cost for the 2008-09 year was probably the highest many producers had seen. Calf prices this past fall were about equal with 2008 prices, so it’s likely most cow-calf producers will have been less profitable in 2009 than they were in 2008.
What hope is there for 2010? “You are probably tired of hearing this, but much of your hope for better prices will be determined by the overall economy,” he says. “If people are still out of work or concerned they might lose their job, it’s a good bet they won't be spending a lot of money on steak. Without some help from beef demand, any price rally may be short term and tempered by the inability to move beef,” Feutz says.
However, with that being said, he adds that the beef industry is in a good supply position. While USDA’s Jan. 1 inventory numbers won’t be released until February, the U.S. beef and dairy cowherds are sure to be smaller than a year ago. Smaller herds mean fewer calves and feeders for this fall, so that should help calf prices, he says.
In addition, cattle on feed numbers should also be smaller, which means less beef on the market, which should support beef prices at higher levels than seen in 2009; that’s as long as beef demand is at least stable. There also appears to be some positives on the export market that could also support higher prices.
“In the short term, fed-cattle prices have recovered about $5-6/cwt. from the lows in early December,” Feutz says. If the market can add another $3-4, feedlots should break even.
Ranchers who retained calves to sell them after the first of the year have seen that market gained about $10/cwt. from the October lows. Cull-cow prices have also strengthened $4-5/cwt.
“If these price trends can continue into spring, not only might cowboys be seeing green grass again, but they may also have some green to put in their pockets,” Feutz says.
-- Livestock Marketing Information Center