January 21, 2000

Despite the lingering drought and shortage of forage, lower feed prices have helped Texas beef producers hold back cattle and hold up prices this winter.

A shortage of feeder cattle has also fueled demand, according to Extension Livestock Marketing Specialist Dr. Ernie Davis. The economist also attributes increased demand to some of the new, cheaper beef-cut products.

"For the first time since 1976, we’ve seen a significant increase in demand for beef," he said. "Hog numbers are down, and there has been a lot of money spent on the beef checkoff program. Retailers finally woke up and saw that these fast food restaurants were beginning to take away their beef sales..."

Looking ahead, Davis expects beef prices to be substantially higher by the fourth quarter of this year.

"Actually, the peak could be extended to 2001," he predicted.

If cattlemen don’t start expanding herds, the smaller numbers could help maintain the rally in beef prices, he added.

Wheat for grazing is struggling in most areas and a shortage of surface water may help curtail any thoughts of expansion.

Some of the state’s producers—especially those with only surface ponds—are hauling water or moving their livestock to other pastures.

According to Joe Miller, livestock economist for the American Farm Bureau Federation, trade estimates for cattle slaughter the week ending Dec. 30, 1999 showed about the same slaughter level as a year earlier. The prior week’s slaughter estimate was 510,000 head— up over 7 percent from the same week in 1998.

Cash fed cattle prices for the first week in January, based on reports on DTN from the major feeding areas, showed prices about flat with the week before. Select and choice steers were bringing right at $68 with a few at $68.50 in the Midwest direct trade and at $68 per cwt. in the High Plains.

Consumer demand for beef held up well through November. Miller said the data for January-November showed a growth of 3-4 percent from 12 months earlier. He offered his own opinion concerning cattle prices in 2000:

"The odds are extremely high for growth this year—the first growth for a full calendar year in 21 years. The industry will need a strong demand as we move into 2000
or fed cattle prices are likely to come under substantial downward pressure.