Angus e-List Vol. 2, 83

MANHATTAN, Kan. - If you're a cattle feeder, the numbers are looking better by the day.

The combination of smaller slaughter and cattle weights hovering near last year's level means late fall beef production will be smaller than in 2001, said Kansas State University agricultural economist James Mintert. That smaller production will be key to cattle price gains this winter and spring.

"Mid-November cash cattle prices rose to $70 [per hundredweight or cwt] from $64 in early October, as both packers and cattle feeders anticipated supplies tightening in the near future," said Mintert, who is the livestock marketing specialist with K-State Research and Extension. "Slaughter cattle prices are poised to trade above $70 this fall, if weights continue to drop and slaughter volume continues to slow down."

At the heart of the recent price surge are signs of a slowdown in slaughter, he said. Cattle slaughter during the first two weeks of November was virtually unchanged from a year earlier. This was in sharp contrast to October when daily slaughter averaged 3.2 percent above a year ago. And supplies of market-ready cattle are expected to tighten through November and December as the impact of smaller late spring and early summer placements on feed become more pronounced.

Receding cattle weights are the other key to the price rise.

"Cattle weights have been problematic throughout 2002," Mintert said. "Weights on a dressed basis averaged 4 percent above the prior year January through June, and were still 2.4 percent heavier than in 2001 during July through September.

"But steer weights in early November averaged just 0.4 percent heavier than last year so it looks like fed cattle weights will follow their normal seasonal pattern this year and decline during November."

The U.S. Department of Agriculture's November Cattle On Feed report indicated that U.S. net placements of cattle on feed during October were 12.5 percent smaller than in 2001 and the on-feed inventory was 9.5 percent smaller than last year.

Partly as a result, Mintert expects year-to-year declines in beef production this winter and spring should help keep Kansas slaughter cattle prices in the mid-$70s during the first half of 2003.

"How high prices move this winter and spring will be determined by how large placements on feed are the rest of the fall, how heavy cattle are when marketed, and by weather conditions," the economist said. "A round of significant winter weather in the Plains could be the catalyst that propels cattle prices into the upper $70s [per cwt] this winter and spring."

Beef exports also began to rebound in the middle of 2002, lending further support to projections that cattle prices will strengthen.

In fact, for the first time in well over 1-1/2 years, recent steer closeouts have been generating slightly positive returns.

"Current projections suggest that average break-even prices on slaughter cattle coming out of feedlots will remain in the very high $60s [per cwt] through the end of the year," said Rod Jones, Extension livestock production economist.

Projections also suggest that break-evens will increase into the low $70s after the first of the year. However, recent futures-based price expectations, suggest that prices could rebound into the mid-$70s on early 2003 closeouts at feedlots, he said.

The higher prices expected in 2003 could push cattle feeding operations back into positive territory.

"Weather-related performance setbacks, increasing feed ingredient prices or fed cattle prices that come in below current expectations, could dampen this current optimism," Jones said.

Beef Exports Continue To Rebound

MANHATTAN, Kan. - U.S. beef export tonnage continued to recover through the summer, with sales to Mexico and South Korea helping lead the way.

In August, total beef exports to all destinations were up 12 percent from August, 2001 levels, said Kansas State University Research and Extension agricultural economist James Mintert. A 14 percent increase in beef movement to Mexico and a 142 percent jump in the quantity shipped to South Korea were largely responsible for the year-to-year export gain during August.

"Although beef exports to Japan were still smaller than last year, it looks like beef trade with Japan is slowly improving," Mintert said. "August export tonnage to Japan was down 19 percent from a year earlier - about the same reduction that occurred in July. That compares with much larger reductions observed during the first half of 2002, when U.S. beef exports fell 29 percent below 2001 totals."

Mintert said, however, that the long-term meat export outlook is still clouded by the possibility of another West Coast port shutdown.

"Fortunately the West Coast docks work stoppage ended with President Bush invoking the 80-day cooling off period to encourage a long-term settlement. So the impact on meat exports was limited to October and, according to the Meat Export Federation, it did reduce exports to key markets such as Japan and South Korea," he said.

The longer-term issues have yet to be resolved between the shippers and dock workers, so there is still the possibility of another work stoppage, he said.