Cattle Outlook: Economic Uncertainty An Issue

US - Although beef cutout prices are down this week and there is growing economic uncertainty- causing problems for the cattle industry, cropland and pasture values are up, writes Ron Plain , University of Missouri.
calendar icon 8 August 2011
clock icon 3 minute read
Ron Plain
Ron Plain

The financial markets captured all the attention this week as the President signed a bill to increase the debt ceiling, the stock market crashed, and the unemployment rate stayed above nine per cent. Uneasiness about the economy is a real concern for the cattle industry as slow economic growth is a drag on meat demand.

USDA issued their annual estimate of farmland values this week. They said 2011 US cropland prices are up 9.4 per cent from last year while the average value of pasture land is up only 1.9 per cent. This is not surprising given what seven dollar corn does to the profitability of crops and livestock.

Boxed beef prices were lower this week. Friday morning the choice boxed beef carcass cutout value was $173.06/cwt, down $1.75 from last week. The select carcass cutout was down $1.33 from the previous Friday to $169.54 per hundred pounds of carcass weight.

Despite the drop in cutout value, fed cattle prices gained this week. The five-area daily weighted average price for slaughter steers sold through Thursday of this week on a live weight basis was $110.74/cwt, up $3.19 from last week. Steers sold on a dressed weight basis this week averaged $175.65/cwt, $1.30 higher than the week before.

This week's cattle slaughter totaled 661,000 head, down 0.6 per cent from the week before and up 1.1 per cent compared to the same week last year. The average steer dressed weight for the week ending 23 July was 847 pounds, up one pound from the week before, 11 pounds heavier than for the same week in 2010, and above year-earlier for the 33rd consecutive week.

The annual July survey of livestock forecasters by the Extension Section of the AAEA indicates on average they expect beef production to be down 1.8 per cent in the second half of 2011 and down 3.6 per cent in 2012.

Survey respondents predict that this decline will lead to more cattle price records. The consensus forecast is for slaughter steer prices, on a live weight basis, to average $111.48/cwt in the current quarter and $115.52/cwt in the fourth quarter of 2011.

For the first through fourth quarter of 2012, the averages of the live weight price forecasts for slaughter steers are: $117.97/cwt, $120.03/cwt, $116.37/cwt, and $119.98/cwt, respectively. They expect 2012 yearling steer prices to average four dollar/cwt higher in 2012 than this year.

Cash bids for feeder cattle around the country this week were little changed from the week before but more markets were slightly lower than higher.

Oklahoma City prices this week were steady to two dollars higher with price ranges for medium and large frame #1 steers: 400-450# $146-$158, 450-500# $143-$146.50, 500-550# $125-$145, 550-600# $132.75-$144.75, 600-650# $127-$145.50, 650-700# $135.50-$142.50, 700-750# $134.50-$141, 750-800# $130-$138, 800-900# $126-$132.50 and 900-1000# $122-$126/cwt.

The August fed cattle futures contract ended the week at $114.12/cwt, up $1.50 from last week's close. October ended the week at $118.60/cwt. December settled at $120.70/cwt.

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