United States-Recession hits beef trade.
UNITED STATES-RECESSION HITS BEEF TRADE.
The economy’s blow to the beef production sector in the first quarter of 2009 came in the form of weak retail demand and a resulting decline in finished cattle prices, Purdue University Extension economist Chris Hurt wrote in a recent report.
Hurt noted the price outlook for the first quarter of 2009 was for finished steers to average nearly $94 per hundredweight, but as the economy weakened, cattle prices dropped and averaged only $81.50 in the January-to-March quarter. A $12.50-per-hundredweight price reduction represents a revenue loss of $750 million in the first quarter alone.
Among the cattle industry’s concerns is that retail prices haven’t dropped as quickly as producer prices have. In the first quarter, for example, retail beef prices averaged $4.33 per pound compared with $4.16 in the same period a year earlier. In contrast, Nebraska finished steer prices were about $8 lower this year than last year.
"So, while live cattle prices were down $8.10 per hundredweight, consumers had to pay $0.017 per pound more for beef," Hurt wrote. "This means beef processing margins increased, with the largest portion coming in retailer margins, which were 13 percent higher than in early 2008."
Vital signs
Nonetheless, Hurt said there are indications of a rebound for beef producers. Retail beef prices peaked at $4.53 per pound last August and dropped to $4.30 in March, while retail margins also have been narrowing in recent months. Finished cattle prices, meanwhile, recovered in the past six weeks, moving upward to $89 from about $80.
"These higher prices may be hard to maintain as we move toward warmer weather when cattle prices have seasonal tendencies to decrease," Hurt wrote. "Expect finished cattle prices to average in the mid-$80s in the second quarter and then increase a couple of dollars in the summer."
If the economy bottoms out by late 2009, finished cattle prices should return to the high $80s to low $90s. Accordingly, steer calf prices should average $100 to $110 this coming fall, compared with $95 to $105 last fall.
"The general tone will likely be for cattle prices to increase over time," Hurt said. "The magnitude of the price improvement may be robust by sometime in 2010 as beef cow numbers continue to drop, beef exports continue to improve and the world economy begins to heal."
