News Update
August 4, 2009

If They Buy Cars, They Will Buy Beef

The “cash for clunkers” program added large incentives to buy new cars, but the willingness of consumers to pay for big ticket purchases probably means the bite of recession is beginning to ease.

“Consumers are beginning to feel a little better about their household budgets. If they will buy more cars, then surely they will also be willing to buy more beef,” said Chris Hurt, Purdue University economist.

The recession has cut deeply into cattle producer finances as loss of beef demand has ravaged cattle prices.

“So far this year, beef production has been down 3%, but finished cattle prices have been down by 10%,” Hurt said.

Nebraska finished steers averaged only $82.70 per hundredweight (cwt.) so far this year compared with $92.30 for the same period in 2008. That is nearly $10 per cwt. lower prices with a smaller supply. Calf prices have been about $9 per cwt. lower this year compared to last.

Unfortunately, retailers have been slow to reflect these much lower farm level prices to consumers.

“For the first half of the year, consumers were actually asked to pay more for beef. Retail prices averaged $4.31 per pound (lb.) this year compared to just $4.20 for the first half of 2008. However, by June, retailers were finally lowering prices below year earlier levels, a move which should help increase purchases and begin to restore better farm prices,” Hurt said.

While most of the lost demand is in the domestic market, the foreign sector is a modest contributor as well.

“Through May of this year, exports of beef have been up about 3%, but imports have risen by 12%. More imports relative to exports means the impacts of trade have contributed an additional nearly 1% to beef supplies in the United States,” Hurt said.

Cattle producers have responded to the depressed cattle market by continuing to slowly reduce the size of the cow herd.

“Beef cow numbers in USDA’s midyear inventory report stood at 32.2 million, a decline of 1%. Dairy cow numbers were down closer to 2%. Over the past three years, the beef cow herd has dropped by 4%,” Hurt said.

Cheap cattle and high feed prices have discouraged cattle feeders, too. Placements into feedlots in May and June were down 5% for calves weighing under 700 lb. and down 15% for cattle 700 lb. and heavier. This has left the number of cattle on-feed at the start of July down 5%.

Help for cattle prices should be on the way for several reasons.

“Finished cattle prices tend to move upward as the weather cools late in the summer. Retail prices are coming down which will encourage more consumption. Cattle slaughter will remain moderate with small supplies coming out of feedlots this fall,” Hurt said.

“Competitive pork and poultry supplies will be down 3% in the last half of 2009, and, most importantly, consumers are beginning to see signs of improvement in the general economy and therefore the beginning of better domestic beef demand,” he said.

Finished steer prices averaged $84.50 in the second quarter and are expected to increase to the mid-to-higher $80s into the late summer.

“The final quarter is expected to see prices that are in the higher $80s to very low $90s. If the general economy continues to improve into the spring of 2010 as expected, prices could rise to the low-to-mid $90s,” Hurt said.

He says calf and feeder cattle prices will be higher as well along with higher finished cattle prices but with feed price uncertainty. In the fall of 2008, prices for steer calves averaged $105 per cwt. and should rise to $110 to $120 this fall. Feeder steers weighing 750 to 800 lb. averaged $94.60 last year at Oklahoma City. This year those same cattle may be $100 to $110.

A more rewarding 2009 calf crop is in store for cow-calf producers, yet many will still not cover full costs of production.

“Maybe the worst is over, but the cattle industry like the general economy will be slow to recover. Losses have accumulated, and even though losses won’t be as large this fall, profits may remain elusive until the spring of 2010. Then, maybe the cattle industry can start to make some hay,” Hurt said.

— Release provided by Chris Hurt, Purdue University.

$6.25 Million Avaiable In Rural Economic Development Grants

Deputy Agriculture Secretary Kathleen Merrigan today announced that USDA is accepting applications for more than $6.25 million in competitive grants under the Rural Community Development Initiative program administered by USDA Rural Development. These funds underscore the importance the Obama Administration places on helping rural business to develop the capacity to address critical housing, community and economic development needs.

“The funding announced today will improve the ability of local organizations to deliver enhanced services in housing, community facilities and economic development and strengthen America’s small cities and towns,” Merrigan said. “These grants will increase economic opportunity and the quality of life in rural areas as the Obama Administration continues working to rebuild and revitalize rural America.”

To be eligible for the Rural Community Development Initiative, applicants must provide matching funds equal to the grant they receive. This leveraging requirement increases the impact of the funding received from USDA. Grant awards are contingent upon the recipient meeting the conditions of the grant award. Eligible applicants include public or private (including tribal) organizations at least three years in existence that have experience working with eligible recipients. Recipients can be private nonprofit organizations, community-based housing and development organizations, low-income rural communities, or federally recognized tribes.

For more information, please see the June 26, 2009, Federal Register, page 30510. The deadline to apply for funding is Sept. 24, 2009. Applicants may also visit www.rurdev.usda.gov/rhs/rcdi/index.htm to obtain an application and program guidelines. Application information for electronic submissions can be found at www.grants.gov. Paper application packages are available from any USDA Rural Development state office. Please visit www.rurdev.gov for a listing of state offices.

USDA Rural Development’s mission is to increase economic opportunity and improve the quality of life for rural residents. Rural Development fosters growth in homeownership, finances business development, and supports the creation of critical community and technology infrastructure. Further information on rural programs is available at a local USDA Rural Development office or by visiting USDA Rural Development’s web site at www.rurdev.usda.gov.

— Release provided by USDA.

Tri-State Cow-Calf Conference

A Tri-State Cow-Calf Conference will take place at the fairgrounds at Gray, Tenn., September 22 and 23, 2009. A tour of three Tennessee cow-calf operations will take place at 1 p.m. followed by a light supper and brief program on September 22 with an 8:30 a.m. to 3:30 p.m. meeting on September 23. Topics covered at the meeting on the 23rd will include Beef Cattle Outlook, Utilization of Byproduct Feeds in Beef Cattle Diets, Managing Genetic Defects and Enhancing End Product, What A Cow-Calf Producer Can Expect From a Custom Feedlot, Making the Decision to Market My Calves or Retain Them and Weaning Healthy Calves.

There will also be a panel of Virginia cow-calf producers who will share information about their operations. Attendees will also have the opportunity to visit a trade show of agribusinesses who support the cattle business. While the focus of the meeting is toward cow-calf producers, anyone in the cattle business will benefit from the information presented.

The meeting is sponsored by the University of Tennessee Extension, Virginia Cooperative Extension and North Carolina State University-A&T State University Cooperative Extension and a USDA Risk Management Education Grant.

Advance registration is requested to plan for materials and a steak lunch. Registration is $10 before September 16 and $15 thereafter. Registration information is available through local County Extension Offices. One may also review information on the conference on the Internet at the following address: www.tnbeefcattleinitiative.org.

— Release provided by Virginia Cooperative Extension.

— Compiled by Mathew Elliott, assistant editor, Angus Productions Inc.