January 30, 2004

Volatile Beef Prices Set To Continue

Beef prices in 2004 is likely to continue the volatile trend in 2003 as the US cattle industry recovers from the loss of most export markets following the mad cow disease case.

This week at the National Cattlemen's Beef Association annual meeting in Phoenix, Arizona, analysts with Cattle Fax took the gored beef bull market by the horns and projected price averages for 2004. Cattle-Fax is a producer owned organization that provides members market price data and analysis.

Before mad cow its analysts expected fed cattle prices to average $85-$86/cwt. Now they expect $76-$78. Feeder cattle projections fell from $95-$97 to $88-$90. "There are a lot of obvious uncertainties," this year, says Randy Blach, Cattle-Fax's executive vice president.

Blach urged his listeners to stay informed about a market that is likely to remain volatile. And, if futures prices offer a chance to hedge profits, take advantage of it. "Now isn't the time to be swinging for the fences," he said. Prices for that all important feedstuff, corn, also look volatile and could be important to hedge as well.

Here are some key assumptions that Cattle-Fax used for the fed cattle market:

• Net beef supplies will increase to 27 to 27.5 billion pounds this year, partly because U.S. imports won't drop much, even with our exports being largely cut off as the year begins. Beef supplies will be up by about two pounds per person this year.
  
  
• Carcass weights will increase amid move above year ago levels by the second quarter.
  
  
• Domestic beef demand will remain strong and will be even with a year ago.
  
  
• Pork and poultry production will increase 1-2%
  
  
• The Mexican border will reopen to US beef imports by February or March
  
  
• Asian markets will reopen to US beef imports by mid-year