Ag Economist Expects Robust Improvement Of Cattle Prices By 2010

The beef industry has suffered one of the most dramatic negative impacts from the general economy but could experience an equally dramatic recovery when the economy rebounds, said a Purdue University agricultural economist.

Improvement Live “As beef cow numbers continue to drop, beef exports continue to improve and the world economy begins to heal, the magnitude of price improvement may be robust by sometime in 2010,” said Chris Hurt. “A return to finished cattle prices of $1 per pound or higher seems probable as per capita beef supplies will be low and competitive meat supplies will drop as well.”

Last summer finished steers were expected to average about $94 per hundredweight in the first quarter of 2009, Hurt said. Improvement Live As the economy weakened, cattle prices fell and averaged only $81.50 in the January to March quarter. That’s $12.50 per hundredweight less than expected.The Purdue Extension agricultural economist said that finished cattle prices are moving almost in lock step with the U.S. stock market.

“Using weekly data since September, the Dow Jones Industrial Average index and finished cattle prices have had a correlation of nearly 90 percent,” Hurt said. “Of course the stock market doesn’t determine cattle prices, but they have both been influenced by macro economic conditions, which reflect weak demand.

Because of seasonal tendencies, Hurt’s not sure these higher prices are here to stay. He expects finished cattle prices to average somewhere in the mid-$80 range during the second quarter and then during the summer months increase a couple of dollars.

“For example, Improvement Live in the first quarter of 2009, retail beef prices averaged $4.33 per pound compared to $4.16 a year earlier,” he said. “In contrast, Nebraska finished steer prices were about $81.50 in the first quarter this year compared to $89.60 a year earlier.

“While live cattle prices were down $8.10 per hundredweight, consumers had to pay 17 cents more per pound for beef.  This means beef marketing margins increased, with the largest portion going to the retailers’ margins, which were 13 percent higher than in early 2008.”

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