Welcome to the 35th issue of Angus e-List

PRICE DECLINE IN CATTLE MARKETS TYPICAL

By Aimee D. Heald

LEXINGTON, Ky. — Feeder cattle prices began to fall in mid-September. At the time, many people believed the Sept. 11 terrorist attacks hurt beef demand and the cattle industry in general.

"In the fall, marketings increase, pushing calf prices down," said Lee Meyer, agricultural economist for the University of Kentucky College of Agriculture. "This year's fall decline started just like a typical year."

Meyer said what happened was a typical drop with cash prices falling from $104/cwt to the low $90s, then rising back into the mid-$90s. Future prices were in the low 90s, then dropped into the low $80s before coming back into the mid-to-upper-90s.

But since late September, he said markets have continued on an erratic, but generally downward path. "The Sept. 11 event probably did not have a direct impact on markets, but affected overall demand through broad economic impacts," he said. "That is probably the cause for continued price declines."

Both feeder and slaughter cattle prices have moved down another $3, but wholesale beef prices are at last year's level. Taken together, Meyer suggested the evidence shows most of the problem is in the uncertain future of the economy.

Meyer recommended a few strategies for cattle producers as they face price decline.
"In the short term, if producers expect to sell in the near future, they need to watch the market carefully," he said. "There tends to be short-term rallies of $3-$5, which provide marketing opportunities. The long term, Meyer said, is more risky. But, the fundamental supply side is still very positive.

"Fewer cattle are going into feedlots," he continued. "The 2002 beef supply will probably be down three to five percent. As a result, spring prices should improve - which means that while backgrounding and retained ownership are seen as risky, they are likely to be profitable."

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