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Cow Numbers Down – Prices Projected Higher

It’s tough to love a blizzard, but at least this winter’s lambasting has helped push beef prices higher (see "Prices Increase Amid Wintry Weather").

It’s tough to love a blizzard, but at least this winter’s lambasting has helped push beef prices higher (see "Prices Increase Amid Wintry Weather").

Analysts with the CME Group's Daily Livestock Report, noted last week that steer weights (reported by USDA with a two-week lag) were 1.9% lower (16 lbs.) than the same time a year ago; heifer weights were 1% lighter (8 lbs.). Fed-cattle and cow-carcass weights are also down.

Plus, even with anemic domestic consumer demand, it seems that supply fundamentals are becoming more predominant.

Last month’s Cattle on Feed inventory was the lowest for January since 2003. Year-to-year, cattle-on-feed numbers have been down 19 of the last 21 months.

These supplies will grow snugger as producers continue to liquidate cows on a net basis. As of Jan. 1, USDA reports the total cattle inventory at 93.7 million head, which is 1% fewer than a year earlier. At 31.4 million head, the estimated beef-cow inventory is also down 1%.

“On a nationwide basis, 29 states reported a decline in beef-cow numbers compared to a year ago,” say Livestock Marketing Information Center (LMIC) analysts. “The report indicated that beef-cow numbers are still in a modest contraction phase as the number of heifers held for replacement purposes was 2% smaller than a year ago.”

Corn prices have helped support cattle prices, too. The latest monthly World Agricultural Supply and Demand Estimates (WASDE) narrowed the projected price range for this year by 5¢ on both ends to $3.45-$3.95/bu.

Of course, corn is even more of a wildcard than typical.

USDA surprised everyone with its year end crop-production report in January, estimating a record corn crop of 13.2 billion bu., 9% more than the previous year. Given the late start to the planting season and sloppy harvest conditions this fall, a significant number of unharvested acres remain. USDA plans to re-poll some producers and may make adjustments to the March report.

Looking further ahead, CattleFax analysts noted in their annual report last month that the worst calf prices in the cycle came in marketing year 2008-09; they should increase through 2014.

Demand will continue to be the overriding factor. According to Randy Blach, CattleFax executive vice president, “If we would have had the same beef demand for 2009 that we had for 2008, fed-cattle prices would have averaged $93/cwt., instead of $83.”

CattleFax offers these price projections for 2010:

Cattle class 2009 average 2010 average 2010 range
Fed steer $83.50 $86-$88 $82-$93
Feeder steer
(750 lbs.)
$95.50 $99-$101 $92-$106
Steer calf
(550 lbs.)
$107 $111-$113 $105-$117
slaughter cow
$47 $53-$54 $47-$59