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Tighter Supply Seen Boosting Cattle Prices

MANHATTAN, Kan. - With 9.2 percent fewer cattle in feedlots than a year ago, cattle feeders can expect cash cattle prices to climb into the upper $70s-per-hundredweight (cwt) area and maybe higher by late winter, a Kansas State University (K-State) agricultural economist said.

"Following the holiday-shortened slaughter schedules, look for slaughter cattle prices to strengthen again, likely moving back up into the mid-$70s during January," said James Mintert, livestock marketing specialist with K-State Research and Extension.

Following a fall quarter weekly average peak of $73.32 per cwt in early December, Kansas slaughter steer prices drifted lower to average $71.54 the week before Christmas as packers and feeders anticipated shorter operating schedules because of the holidays.

"Longer term, Kansas cash cattle prices are expected to rise further - into the upper $70s during February-March. Whether or not cash prices penetrate the $80 barrier will depend on weather conditions in the January-through-March period."

The U.S. Department of Agriculture, in its Dec. 20 Cattle on Feed Report said that as of Dec. 1, the U.S. cattle on feed inventory was 9.2 percent smaller than last year and 7.1 percent smaller than the five-year average for December.

That reduction indicates that fed cattle supplies will be much tighter this winter than they were a year ago, Mintert said.

U.S. cattle feeders' net placements (placements minus other disappearance) of cattle on feed during November were 3.2 percent greater than a year earlier, but the total was still 5 percent smaller than the five-year average.

"Although November placements on feed were larger than expected by the trade, it's important to remember it follows a very large [12.5 percent] net placement decline during October. Combined net placements on feed from September through November were 3.5 percent smaller this year than last year," the economist said.

Despite this winter's tighter cattle supply, Mintert does not expect marketings to drop as much as the on-feed inventory suggests. Cattle feeders, he said, are likely to sell their inventories more quickly than they did last winter.

"For example, during November, marketings as a percentage of the on-feed inventory rose 6 percent above last year's level. As a result, average daily marketings during November were actually 1 percent larger than last year. So, look for marketings to drop below the prior year this winter, but the percentage declines will be much smaller than the declines in cattle on feed," he said.

Meat Supplies Set Record in 2002
Supplies Should Decline In 2003

MANHATTAN, Kan. - Meat is still the main entree on U.S. consumers' tables, it appears.

"U.S. consumers ate more meat in 2002 than at any time in history," said Kansas State University (K-State) agricultural economist James Mintert. "Total per capita meat consumption of all red meat and poultry by U.S. consumers is expected to approach 219 pounds [retail weight] during 2002, which is a new record."

The figure is in sharp contrast with 1960, when total meat consumption averaged 166 pounds per person and 1980 when per capita consumption reached 195 pounds. In 1990, consumption hit 199 pounds.

"So, during 2002, Americans consumed about 32 percent more meat than in 1960, 12 percent more than in 1980, and 10 percent more than in 1990," said Mintert, who is the livestock marketing specialist with K-State Research and Extension.

The larger consumption was far from evenly distributed among all livestock industry sectors, however.

"Virtually all of the growth in meat consumption over the last four decades has been in poultry," Mintert said.

Chicken [broiler] consumption on a retail-weight basis shot up to about 80 pounds in 2002, a 240-percent increase since 1960 when consumption was 23.5 pounds per capita. In contrast, U.S. beef consumption changed little over the same time period, rising just 6 percent and pork consumption fell 14 percent.

The increase in meat consumption during 2002 was not good news for U.S. livestock producers. Record consumption occurred because domestic meat supplies were record large. And the surprisingly large increase in meat supplies helped drive livestock prices lower in 2002, resulting in big financial losses for cattle feeders and hog producers, the economist said. During that period, U.S. consumers' per capita meat consumption rose about 2.5 percent over 2001 levels.

The increase in total meat consumption stemmed from increases in beef, pork and chicken consumption of 1.9, 1.6 and 4.5 percent, respectively, compared to 2001.

Tighter supplies of U.S. livestock in 2003 should support livestock
and poultry prices.

"U.S. beef supplies [net of imports and exports] in 2003 are expected to decline about 2 percent compared to 2002, which should drop domestic beef consumption back to about the same level as 2001," the economist said.

Pork supplies are also expected to dip below 2002 levels – possibly by as much as 2 percent, he added.

"Finally, U.S. consumers are not expected to see as much chicken in the meat case as they did in 2002, as chicken producers start to reduce production," Mintert said. "Moreover, chicken exports could also improve, although they are not likely to rebound back to levels seen before Russia initially banned U.S. chicken imports. The bottom line is that domestic chicken consumption could actually fall about 1 percent below 2002's, which would mark just the third time in the last two decades that U.S. chicken consumption fell below the prior year."

For more information about livestock markets, visit the K-State's Livestock & Meat Marketing Web site at http://www.agecon.ksu.edu/livestock/.

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