Denver - Most U.S. cattlemen could see profits during the next two years as supplies shrink cyclically, but obstacles abound the first half of 1998, said Topper Thorpe, executive vice president of Cattle-Fax.
"Prices and profits may be limited during the first half of 1998 by large front-end supplies of fed cattle, significant losses on cattle being sold out of feedlots today, unsettled global demand and increased competition from other meats in the domesitc market," Thorpe said.
Prices for 1998 were projected at an average of about $69.00-$70.00 per cwt for fed cattle, the upper $70.00's for 750-lb feeder steers and low $90.00's for 500-pound steer calves, Thorpe said as he presented the Cattle-Fax outlook at the National Cattlemen's Beef Association annual convention.
Thorpe stressed the cattle feeding industry needed to stay current while marketing the large cattle supplies during the first quarter.
"Cattle feeders have suffered significant losses recently and a continuation of these losses could have a negative impact at all levels throughout 1998," Thorpe said.
Once the large numbers of front-end fed cattle supplies are worked through,the industry should see a cyclical decline in all cattle numbers that will reduce beef production and increase demand for calves, feeders and fed cattle, Thorpe said.
"Beef production in 1998 is now estimated at 24.8 billion lbs, down three percent from 1997," Thorpe said.
Beef supplies will be well above the previous year the first quarter of 1998, but drop below corresponding year-ago levels the rest of the year, Thorpe said.
Feeder prices were expected to show gains the next few years in response to supply declines and increased feedlot profitability. Once they get through the current weak market, feedlots were seen becoming more profitable as supplies decline and packers compete more aggressively for live cattle.
"After averaging $74.00 in 1997, prices on 750-lb feeders should average in the upper $70.00 this year. Calf prices are expected to trade in the low $90.00's after climbing more than $20.00 in 1997," Thorpe said.
Beef demand remains a tough challenge for the industry, espeically amid stiff competition from large supplies of pork and poultry, Thorpe said.
"Even with beef production down three percent, the total net supply of meat for domestic consumption will be larger in 1998 than last year," Thorpe said.
Any increases in beef prices will have to come from the cyclical decline in total beef tonnage.
"Although the U.S. economy is in good shape, consumers are not expected to increase the total dollars they spend on beef in 1998," Thorpe said.
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