Dillon Feuz: Cattle prices expected to remain stable in 2011 | TSLN.com

Dillon Feuz: Cattle prices expected to remain stable in 2011

Gayle Smith

Courtesy photo/Van Newkirk Herefords"It seems like the high-end beef prices are struggling compared to the chuck cuts like ground beef. But instead of purchasing chicken or other meats, consumers are liking beef more and staying loyal to it, " said Dillon Feuz.

Although the economy and overall beef demand are still lagging, the supply of beef and growing trade with other countries should keep feeder calf prices in 2011 similar to 2010 levels, a Utah State University livestock marketing specialist predicted.

Dillon Feuz spoke to a group of nearly 200 feedlot operators and ranchers at the Southeast Wyoming and Western Nebraska Beef Production Convention held Nov. 23 in Torrington, WY.

In his presentation, “Predicting Feeder Cattle Prices and Market Outlook,” Feuz pointed out ranchers have enjoyed calf prices in eastern Wyoming and western Nebraska that are generally $15-$20 per hundredweight higher than prices in the fall of 2009. He attributed the rise to the nation’s short beef supply and growing trade with other countries.

Basically, feedlot operators are paying more for feeder cattle in an effort to keep their lots full. “The cost to operate a feedlot is basically the same whether the pens are full or empty,” Feuz told the group. “It still costs the same amount to run the feed mixer and other equipment. The help still gets paid the same. The feedlots try to run at near full capacity. If there is excess capacity, they will be bidding aggressively for the calf supply that is out there,” he said.

Adding to the aggressive bidding is word that the number of calves born in 2010 is the lowest number in over 40 years, Feuz continued. “Producers are also keeping a relatively small number of replacement heifers, which indicates that no herd building is taking place.”

The nation’s cow inventory also continues to decline. “There is no data out there to suggest that we are increasing cow herd inventory,” he said. “In fact, we are anticipating another decrease of 1-1.5 percent on January 1.”

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The replacement heifer inventory is also down another 2.2 percent, adding to the six-year decline. “Until that number turns around, there won’t be any growth in the cowherd inventory,” Feuz said. “It will be at least 2-3 years after that number turns around before we will see more beef on the market.”

The 2010 commercial beef production numbers are slightly below 2009. Feuz projects the supply of beef to remain fairly tight. “If producers ever start expanding the herd, these numbers could even be tighter because more heifers will be taken from the feedlot placements to be put into production. It also takes the heifers a few years to grow a calf that can be put into production,” he explained.

Surprisingly, other meat sectors such as chicken and pork haven’t posed much competition for the beef industry. “Roasts, steaks and hamburger all have different demand,” he said. “It seems like the high-end beef prices are struggling compared to the chuck cuts like ground beef. But instead of purchasing chicken or other meats, consumers are liking beef more and staying loyal to it. If they can’t afford steak, they are purchasing a roast or hamburger rather than a chicken breast or pork chop,” he said.

At the same time, more pounds of beef is being produced per cow now than in the 1970s. “Fed cattle slaughter weights have increased substantially, and cattle are generally harvested at a younger age than they were in the 1970s,” Feuz said. “Beef production is becoming much more efficient.”

Feuz said he doesn’t anticipate a big increase in domestic beef demand in 2011, since the nation’s economy is still struggling. However, he does expect trade with countries like Japan and Korea to continue to grow into the future. “Mexico and Canada are also major trading partners, and that is expected to continue in 2011,” he said.

The uncertain factor is the price and supply of corn. “Corn is just a big uncertainty,” Feuz cautioned. “Corn prices are sharply higher in 2010 than in 2009. This has pressured feeder cattle prices lower. While there are a number of contributing factors, the fact that over a third of the corn crop is mandated to go into ethanol production will artificially increase the cost of corn.”

Feuz told the group he anticipates 2011 spring feeder cattle prices to be nearly equal with prices in spring 2010, which were $117-$123 per hundredweight for a 750-lb. steer. He also anticipates fall of 2011 cattle prices to be similar to 2010 with yearlings worth $108-$118 for a 950-lb. steer in September, and $120-$130 for a 550-lb. steer in October.

Although the economy and overall beef demand are still lagging, the supply of beef and growing trade with other countries should keep feeder calf prices in 2011 similar to 2010 levels, a Utah State University livestock marketing specialist predicted.

Dillon Feuz spoke to a group of nearly 200 feedlot operators and ranchers at the Southeast Wyoming and Western Nebraska Beef Production Convention held Nov. 23 in Torrington, WY.

In his presentation, “Predicting Feeder Cattle Prices and Market Outlook,” Feuz pointed out ranchers have enjoyed calf prices in eastern Wyoming and western Nebraska that are generally $15-$20 per hundredweight higher than prices in the fall of 2009. He attributed the rise to the nation’s short beef supply and growing trade with other countries.

Basically, feedlot operators are paying more for feeder cattle in an effort to keep their lots full. “The cost to operate a feedlot is basically the same whether the pens are full or empty,” Feuz told the group. “It still costs the same amount to run the feed mixer and other equipment. The help still gets paid the same. The feedlots try to run at near full capacity. If there is excess capacity, they will be bidding aggressively for the calf supply that is out there,” he said.

Adding to the aggressive bidding is word that the number of calves born in 2010 is the lowest number in over 40 years, Feuz continued. “Producers are also keeping a relatively small number of replacement heifers, which indicates that no herd building is taking place.”

The nation’s cow inventory also continues to decline. “There is no data out there to suggest that we are increasing cow herd inventory,” he said. “In fact, we are anticipating another decrease of 1-1.5 percent on January 1.”

The replacement heifer inventory is also down another 2.2 percent, adding to the six-year decline. “Until that number turns around, there won’t be any growth in the cowherd inventory,” Feuz said. “It will be at least 2-3 years after that number turns around before we will see more beef on the market.”

The 2010 commercial beef production numbers are slightly below 2009. Feuz projects the supply of beef to remain fairly tight. “If producers ever start expanding the herd, these numbers could even be tighter because more heifers will be taken from the feedlot placements to be put into production. It also takes the heifers a few years to grow a calf that can be put into production,” he explained.

Surprisingly, other meat sectors such as chicken and pork haven’t posed much competition for the beef industry. “Roasts, steaks and hamburger all have different demand,” he said. “It seems like the high-end beef prices are struggling compared to the chuck cuts like ground beef. But instead of purchasing chicken or other meats, consumers are liking beef more and staying loyal to it. If they can’t afford steak, they are purchasing a roast or hamburger rather than a chicken breast or pork chop,” he said.

At the same time, more pounds of beef is being produced per cow now than in the 1970s. “Fed cattle slaughter weights have increased substantially, and cattle are generally harvested at a younger age than they were in the 1970s,” Feuz said. “Beef production is becoming much more efficient.”

Feuz said he doesn’t anticipate a big increase in domestic beef demand in 2011, since the nation’s economy is still struggling. However, he does expect trade with countries like Japan and Korea to continue to grow into the future. “Mexico and Canada are also major trading partners, and that is expected to continue in 2011,” he said.

The uncertain factor is the price and supply of corn. “Corn is just a big uncertainty,” Feuz cautioned. “Corn prices are sharply higher in 2010 than in 2009. This has pressured feeder cattle prices lower. While there are a number of contributing factors, the fact that over a third of the corn crop is mandated to go into ethanol production will artificially increase the cost of corn.”

Feuz told the group he anticipates 2011 spring feeder cattle prices to be nearly equal with prices in spring 2010, which were $117-$123 per hundredweight for a 750-lb. steer. He also anticipates fall of 2011 cattle prices to be similar to 2010 with yearlings worth $108-$118 for a 950-lb. steer in September, and $120-$130 for a 550-lb. steer in October.

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