Editor''s Notebook: Volatility, Options Ahead for 2010

December 9, 2009 06:00 PM

Kim Watson-Potts
At the end of 2009, you may be breathing a sigh of relief as harvest is finally finished, calves are weaned and you've either already sold them or are planning to feed them through winter.

Then you read this headline: "Volatility in Cattle and Beef Prices Expected to Continue Well into 2010.” That's the lead of the latest Livestock, Dairy, and Poultry Outlook report from USDA's Economic Research Service. The report mostly focuses on continued uncertainty in the cattle market.

The report starts by looking at pasture and winter wheat conditions in early November. At that time, most winter wheat pastures were behind in growth, which could delay stocker turnout.

"Prices for feeder cattle are in line with projected cattle feeding costs and recently observed fed-cattle futures prices,” the report says. "However, the oft-observed price support from cool-season pasture demand, especially wheat pasture, has been
notably missing from both cash and feeder cattle futures prices, despite the favorable fall, but may reflect the late emergence and behind-average growth in some areas of the Southern Plains.”

Meat on the market. Beyond a volatile feeder market, the report also points to the latest dairy herd buyout as increasing the number of dairy cows in the slaughter mix. While the buyout has increased dairy cow slaughter, dairy price pressures would have likely forced more cows to market anyway.

Beyond that, here are some other areas the report says led to volatility in the market:
  • Declining calf slaughter numbers but higher dressed weights.
  • Increased feedyard placements.
  • Reduced fed-cattle marketings.
  • Proportion of heifers on feed is at 38.5%—the largest proportion for the last seven years. This also limits the number of production females available for expansion.

On tap for 2010. But there are bright spots on the horizon for cattle producers. There are many opportunities to grow beef markets in 2010, and much of that growth is overseas. According to USDA, U.S. beef exports are expected to show a 3% decline in 2009.
However, stronger than previously expected year-to-date increases in sales to Japan, Vietnam and Hong Kong, as well as steady increases in South Korea, have offset some losses in sales. U.S. exports are expected to increase almost 6% in 2010.

New market opportunities are a good thing, but they require careful negotiation. That will be an area to watch as we roll into 2010.

To read the USDA report, click here.

Kim Watson-Potts, Editor, writes from San Antonio, Texas kwatson@farmjournal.com

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