If you're expecting $74 to $75/cwt. prices for your slaughter cattle from April through July and possibly for all of 2000, better think again. That was the alert put out by economist and business consultant Bill Helming in his special Feb. 24 report to clients.
"Bottom line, there appears to be an excessive degree of optimism and unrealistic expectations regarding the fed cattle market for the year 2000," Helming warns. Risks exist this year, including the potential for significant losses. He predicts a $65 to $74/cwt. typical price trading range in the Texas Panhandle with prices not likely above $72 or $73.
The main culprit is continuing record high beef supplies, offsetting the generally positive outlook for domestic consumer and export demand for beef this year. Without this positive beef demand outlook, fed cattle prices would be significantly lower than they are, he says. Prices reflect both supply and demand factors with the supply factor being the most concerning, Helming believes. Here are highlights:
* Total beef production for 2000 will be at least equal to last year's levels and easily 1-2% above the 1999 all-time high of 26.39 billion pounds. This figure includes a 4.5% smaller beef and dairy cow slaughter accounting for 15.8% of U.S. commercial slaughter compared with 1998.
That trend continued the first five weeks of 2000, dropping 6.4% below a year earlier. Total cattle slaughter and especially total fed steer and heifer numbers should increase this year in order for the feedlot sector to stay current, Helming suggests.
* Average carcass weights for January 2000 were up 8 lbs., helped by favorable feeding conditions that have sparked higher carcass weights and more beef production so far this year.
* "Even though we have been liquidating the total cattle inventory since 1996, U.S. beef cow inventory numbers could be understated by 500,000 to 750,000 head, despite USDA's slightly revised upward estimates made last January 1," Helming says. A further upward adjustment may come between now and January 2001. This partly explains why feedlot placements have been so large from July 1999 through February 2000.
* More lightweight cattle and calves fed the last year tended to "spread out" fed cattle marketings. But Helming believes this advantage has been offset by a record 11% more cattle on feed Feb. 1, 2000 as reported in the USDA 7-State Cattle On Feed Report. This could mean significantly larger total beef supplies the first half of 2000, possibly for the year compared with 1999.