December 17, 2004

2005 Beef Outlook Steady for US State

Beef producers and consumers can look forward to steady prices for 2005, according to Jim Gill, market director for the Amarillo-based Texas Cattle Feeders Association (TCFA) in the US.   

Gill said a projected 2% to 3% increase in beef production in 2005 will push average retail beef prices to around $4 per pound, slightly below the $4.05 average in 2004. "However, the anticipated reopening of the Japanese beef market some time in 2005 should prevent prices from falling any lower," he said.

Gill was speaking at the annual TCFA year end news conference.

In addition, beef prices will continue to be challenged by competing meats, as Gill predicts that both pork and poultry supplies in 2005 will increase 2% to 3% above 2004 production levels.  However, he predicts a continued strong consumer demand for beef, which will tend to keep retail prices steady.

Fed cattle prices will trade from $80 to $92 in 2005, Gill predicted. His outlook shows fed cattle prices ranging from $85 to $92 in the first quarter of 2005; $80 to $90 in the second and third quarters; and $85 to $90 in the fourth quarter. That's a similar trading range to 2004, he said, adding that 2004 prices in the fourth quarter have been supported by the weather.

"Weather has been the developing story in the industry for the past two months," he said.  "Following a wetter-than-normal fall and early winter, production in feedyards has been reduced and cattle marketings have been delayed. This has supported fed cattle prices but, as with weather markets, the price increase has not offset the production setback."

Feeder cattle supplies will continue to tighten over the next couple of years, he said, reflecting the liquidation that has been in effect since 1996. "A 750-lb. feeder steer averaged near $103.98 in 2004 - more than $15 higher than 2003." However, losses in the packing industry are translating into lower bids for fed cattle in feedyards, which could put pressure on feeder cattle prices. "It is likely the same 750-lb. feeder steer will average in the mid $90s in 2005."

Looking at the grain markets, 2004 corn production is estimated at a record 11.9 billion bushels, which will put pressure on prices. "Corn prices, which averaged near $5.04 per cwt. in 2004 in the TCFA area, will likely be closer to the 2003 average of $4.75. However, a very strong export market will prevent prices from falling much below that level."

TCFA represents cattle feeders in Texas, Oklahoma and New Mexico, an area that produces around 7 million fed cattle a year, 30% of the nation's fed cattle production.