Fed cattle market to stay challenging, Blach tells cattle feeders

Cattlemen can look forward to continued strong prices into 2006 for feeder and stocker cattle, according to Randy Blach, executive vice president of Cattle-Fax, but prices are expected to come off from the remarkable run seen in 2005.

Speaking to more than 500 cattle feeders attending the Annual Convention of the Texas Cattle Feeders Association recently in Grapevine, Blach said feeder cattle prices will average about $110 in 2005 and about $105 in 2006, and 550 pound steer calves, which will average $127 this year, will average about $120 next year.

Fed cattle prices, he predicted, will average about $84 in 2006, coming off an $86.50 average this year. Fed cattle margins will be thin in 2006, Blach said, in spite of corn prices that are expected to stay relatively low.

The drop in prices next year will be fueled by an expected increase in supplies as cattle herd expansion continues at a rapid pace. “The total cow herd will increase about one million,” he said, “with beef cows up 750,000 on Jan.1, 2006.” That will boost beef production about 700 to 800 million pounds next year, with most of the increase coming from mid-year on. By the same token, steer and heifer slaughter will increase 600,000 to 700,000 head next year, he said.

Net beef supplies, however, are expected to increase about 200 million pounds, he predicted. “The key assumption is that export markets will resume soon and the U.S. will recapture 40 percent to 50 percent of that lost market fairly quickly. This will have a significant impact on the outlook,” he said. “Global competition is going to be strong and lost market share won’t come back overnight.”

Total meat supplies will be record high in 2006, with pork and poultry production showing a 2 percent to 3 percent increase. “However, beef demand remains strong and has held nearly all the 25 percent growth that has occurred since the late 1990s,” he said. “While year-on-year growth has slowed, demand remains solid.”

Blach predicted more product branding, more value differentiation and more new, consumer-friendly products in the next few years, all of which will benefit the industry. Consolidation will continue at all levels and producers may expect to see more coordinated production systems to develop that are based on relationships.

“The fed cattle market will stay challenging in 2006,” he said. “But cattle feeders who watch the bottom line and are willing to take advantage of new opportunities will be successful.”

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