The past year didn’t end the way cow-calf producers hoped.
After getting good calf prices through much of the year, prices slid
and stalled in the last few months. Falling demand and a mountain of
beef knocked the legs from under the market.
But glimmers of good news appeared in late December, suggesting a
return to good prices could happen in mid-to late 2002.
“I expect 2002 calf prices to be steady to higher,” said Manitoba
Agriculture livestock market analyst Janet Honey.
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However, the big recovery won’t happen until the fourth quarter, she
predicted, and prices in the first nine months may be below 2001 prices
for the same period.
The Dec. 21 cattle on feed report by the United States Department of
Agriculture found 5.3 percent fewer cattle were placed on feed in
November compared to November 2000 – a major decrease.
At the same time the U.S. cow herd is not expanding, so feedlots will
have some excess capacity in the spring compared to now, when they’re
filled with overweight animals.
Fewer cattle being slaughtered and more room in the feedlots is good
news for cow-calf producers because finished prices should go. Then
feedlot operators will be able to pay for calves.
But Honey said cow-calf producers shouldn’t expect the same lucrative
prices from feedlots. They paid too much for many calves in 2001 and
lost money in recent months.
“They won’t be as keen to pay the very high prices they paid in 2001,”
said Honey.
The beef industry has been labouring under a combined hit to demand and
a surge in supply. The Sept. 11 terrorist attacks cut consumer
restaurant spending on high priced beef cuts, so even though grocery
sales of beef increased, the overall value of each carcass declined.
Beef demand in Japan, the biggest export customer for the U.S., also
slumped after mad cow disease was discovered in the Asian country.
While a lot of feeder cattle were fattening, many feedlot operators
held back animals waiting for better prices. That produced record-heavy
slaughter animals, which added to the supply glut.
The recent USDA report points to a less-glutted situation a few months
from now, but “there’s a lot of beef around that has to be used up in
the first quarter,” said Honey.
Large amounts of beef in cold storage will also weigh on the market,
slowing the price recovery.
Beef supply in the first quarter will be up between two and four
percent, she said.
“As the first quarter progresses, fed cattle prices should start to
rise, but will still average eight to 10 percent below 2001.”
