November 11, 2008


US cattle market dependent on corn price and economy

Feeder cattle prices and beef demand may weaken next year, but much depends on the 2009 corn crop, said a beef cattle expert from the University of Wyoming.


If next year's corn crop is good, then the second half of 2009 may not be much different from this year, said Chris Bastian, assistant professor in the Department of Agricultural and Applied Economics.


If the US cattle herd continues to shrink, feeder cattle supply will contract by 2010 at which point calf prices could start to rebound. On the other hand, Bastian expects increased demand for heavy weight feeder cattle to continue.


Higher corn prices in the near-term prompts more demand among feeders for heavier cattle because they have to be on feed for a shorter time but fetch a more profitable price, said Bastian.


As a result, demand for lighter weight feeder cattle has weakened, while the price difference on a hundredweight basis between light and heavy cattle decreases. 


Bastian said the price environment is likely to continue into 2009, and that the US economy and fuel cost will affect demand.


"What goes on in the macro economy makes a difference to us," Bastian said.


US beef imports are 23-percent lower than in 2007 year-to-date through August, said the USDA Economic Research Service. However, increases are expected in 2009 as the US dollar strengthens and domestic cow slaughter declines.


US beef exports are expected to benefit from strong Asian demand, despite global economic slowdown. US exports are projected to grow 10 percent in 2009.

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