Financial experts offer fall cattle price predictions
April 21, 2010
An ag economist with Montana State University and the senior banking executive for Stockman Bank Financial have looked in their crystal balls to provide predictions for fall cattle prices.
Speaking at the recent Montana Livestock Forum and Nutrition Conference on the Montana State University campus, the two financial experts both said U.S. beef production is forecast to be lower in 2010 and cattle numbers would continue to tighten. Both men said changing consumer demands and interest in how livestock are raised is part of the new paradigm for the beef industry.
Dr. Gary Brester, a professor with the MSU Department of Agricultural Economics and Economics, said his research indicated October feeder futures would be at $1.12 a pound.
Brester said the domestic demand is likely to be flat because of the forecasts for slow economic recovery and the maturity of the U.S. market.
“It’s important for this industry to increase demand,” he said.
As producers, it is important to know that demand does matter. The changes in demand has impacted fed cattle prices as well, he noted.
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He added that if prices climbed, it would lead for an incentive for more beef to be imported. He said there has been an increase especially from Canada.
“We import 14 percent of our supply and currently export six percent,” he said.
The data suggests $1.17/pound for 500-600 pound Montana steer calves this fall, Brester said. He said the data suggests $1.08 for 600-700 pound calves. Predicted prices from another source indicated $109.50 for 650 weights for Oct. 28, he said.
“With under 94 million head, we are now producing almost as much beef as we did with 130 million head in 1970,” Brester said. In other words, we are producing more beef from less animals, because of the technological changes in the past decades.
Brester said there is a growing movement among consumers to require accountability from producers.
“People want to know where the steaks come from,” he said. “They want to know the ranch it actually came from but this can help because profitability can come with traceability.”
Bratsky, the senior executive office for Stockman Financial, the largest ag lender in Montana, noted that the U.S. feedlot cattle supply is the smallest recorded in seven years according to the Department of Agriculture.
“The cattle supply has decreased because many producers have lost money for the past several years,” he said. “These losses were due to high feed prices and later, a recession that slowed beef sales and drove cattle prices down even further. The smaller cattle herd now couple with rising beef prices has turned cattle prices higher, thus now increasing profitability.”
Bratsky said shifting consumer trends to healthier eating and falling customer confidence in disease-free U.S. beef are prominent concerns for this mature industry. He noted that disruptions in trade, due to outbreaks of mad-cow disease, have affected down-stream and live exports. Industry players who utilize feedlots are also feeling the pinch due to drought conditions and high feed prices.
“Tough times across the livestock sector can and should get better this year, but it will take a huge increase in demand,” Bratsky said. “Supply is certainly not the problem, but what we need is the return of customer confidence.
“When we look ahead to fall calf prices, Chicago Mercantile Exchange feeder cattle futures, adjusted for historical average basis, projected to fall would be at $120 per hundred weight.”
He said market analysts have warned that feeder cattle prices will be susceptible to variances in feed prices and also to cash fed-cattle prices throughout the year.
“Maybe current feeder futures do not offer enough profit for your calves,” he said. “If that’s the case, you may decide to wait and see if the markets improve before you make your decision.
“The main point to remember is not to be greedy and to take advantage of profits when they are available.”
Bratsky said his best guess for fall prices would be $86 to $90 for fed steers and $99 to $104 range for 750 pound feeders steers. His prediction for 550 pound steer calves was in the $110 to $115 range.