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Strong Demand, Declining Weights Driving Cattle Prices

    MANHATTAN, Kan. –Cattle feeders have been selling cattle in a timely fashion and the payoff has come in higher prices, a Kansas State University agricultural economist said. Western Kansas cash cattle prices climbed to the mid-$70s per hundredweight (cwt) recently, a 12 percent increase from a year ago, boosted by falling cattle weights and strong demand for beef, said James Mintert with K-State Research and Extension.

    At the start of the year, steer weights averaged 805 pounds, nearly 1 percent heavier than a year ago but by the end of March, weights dropped to 783 – 2 to 3 pounds below a year ago, he said. "Fed cattle weights’ transition from above to below a year ago has helped support cash prices in recent weeks and will continue to be supportive of prices through mid-May," Mintert said.

    "The fact that steer weights have moved from above to below a year ago indicates two things – it appears that cattle feeders’ marketings are current, perhaps because discounts on deferred live cattle futures have encouraged cattle feeders to market cattle aggressively to avoid selling at lower prices later in the spring," Mintert said. "Secondly, last fall’s light placement weights are, as expected, leading cattle feeders to market cattle at somewhat lighter weights."

    Chicago Mercantile Exchange June live cattle futures closed at $69 per cwt on May 4 and August at $69. October futures closed at $72. An increase in heavyweight placements of cattle on feed in the first quarter of 2000 suggests that fed cattle weights could start to climb again, perhaps as early as June, Mintert said. "If this happens, it could help push cash prices into the upper $60s by late spring or early summer."

    Daily beef production has averaged 2 percent above 1999 levels since the first of the year, and in April, about 1 percent above a year ago. Despite the larger output, slaughter cattle prices in April averaged between $73 and $74 per cwt – 12 percent above a year ago, he said. And wholesale beef prices averaged about 14 percent above 1999's. "Clearly, strong domestic and export beef demand are responsible for the year-to-year price rise," Mintert said.

    Large placements of cattle on feed late last fall and over the winter indicate cattle marketings are poised to rise later this spring, he said. As a result, beef production is likely to remain above last year early this summer, but could dip below last year’s level by mid-summer, he said. By late summer both slaughter and beef output are expected to fall below a year ago.

    "The biggest year-to-year reduction in beef production is still expected to occur in the fourth quarter when beef production could drop 4 to 5 percent below 1999's," he said.

   Mintert expects cash prices to weaken from recent mid-$70s prices if fed cattle marketings start to rise in May and June as expected. "Over the next month, odds favor cash prices dropping back to near $70," he said, adding that current futures indicate western Kansas cash prices are likely to dip into the high $60s in late spring and early summer. "Whether that happens depends partly on cattle weights and beef demand strength."

    "If steer weights remain below a year ago and beef demand remains strong as it has recently, cash prices could bottom out near $70. On the other hand, if weights increase and beef demand weakens, then cash prices are expected to dip into the upper $60s," he said.

    Cash cattle price forecasts based on CME futures indicate that western Kansas fed cattle prices in May will average in the $70 per cwt area. Prices in August look to dip to the $68 to $69 area but could start to recover in the fall, with indications for October, based on CME futures, about $71 and possibly rising to $73 to $74 by November.

    The gains in cattle prices the past several months have led to profits well above the long-term average for cattle feeders but that may change this summer, said Extension agricultural economist Rodney Jones. Average profits of about $20.48 per head were realized on February closeouts and preliminary calculations suggest profits of $40 to $50 per head have been realized on average March and April steer closeouts.

    "But breakeven prices needed to cover all costs will increase to above $71 per cwt by May and into June, as higher-priced feeder cattle begin to finish," Jones said. "Even considering recent increases in futures-based fed cattle price forecasts, there is a strong possibility that average net returns will be negative for at least a few closeout months this summer."

    K-State Research and Extension is a short name for the Kansas State University Agricultural Experiment Station and Cooperative Extension Service, a program designed to generate and distribute useful knowledge for the well-being of Kansans. Supported by county, state, federal and private funds, the program has county Extension offices, experiment fields, area Extension offices and regional research centers statewide. Its headquarters is on the K-State campus in Manhattan.

    Mary Lou Peter Communications Specialist K-State Research & Extension News Mintert is at 785-532-1518 Jones is at 785-532-1957

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Hogs Prices Surge to Over $50, Further Gains Possible


   MANHATTAN, Kan. – "Make mine with bacon, please" seems the mantra at fast food restaurants lately -- a trend that’s helped boost cash hog and wholesale pork prices over year-ago levels. And, the rally may not be over yet, a Kansas State University agricultural economist said. Indeed, overall pork demand and a recent cutback in hog slaughter lifted cash hog prices in the benchmark Iowa-southern Minnesota market to over $50 per hundredweight in late April from $45 just days earlier, said James Mintert with K-State Research and Extension.

   "Wholesale pork demand has been very strong, with the most significant increase seen in the pork belly market, where recent prices have been double the year-ago level," Mintert said. "But prices for other pork cuts have also been very strong."

   He cited April ham prices, which shot up to 30 percent over year-ago levels; 72 percent lean pork trimmings, which averaged 47 percent more; and pork loin prices, which averaged 36 percent more than a year ago. "So, it appears that consumer demand for pork, like beef, has been much stronger than it was at this time last year," Mintert said. Americans aren’t the only ones who’ve had a taste for pork lately. Pork exports have jumped dramatically since the first of the year. USDA data reported pork exports surged to 85 percent larger than a year ago for January-February 2000.

   "But, the dramatic growth in pork export tonnage was overstated because of difficulties in reporting pork shipments to Russia under USDA’s food aid program," Mintert said.

  USDA data indicated that 75 percent of the pork increase in January-February 2000, versus January-February 1999, was related to an increase in shipments to Russia. However, private sources indicate that much of the pork was actually shipped in late 1999 but not accounted for until early 2000, he said.

   "Still, pork exports to destinations other than Russia during early 2000 increased 18 percent, compared to 1999," Mintert said. Exports to Mexico were up 105 percent. Sales to Canada were up 25 percent and exports to Japan climbed 19 percent.

   "If pork exports remain this strong through the spring and summer, it will provide a boost to wholesale pork and cash hog prices," Mintert predicted.

   Hog slaughter has dipped and that has further bolstered cash hog prices, he said. Daily hog slaughter was down 5 percent from year-earlier levels in the first quarter of 2000 and April slaughter was down 6 percent -- somewhat more than expected, given USDA’s March Hogs and Pigs report. "Seasonally, cash hog prices usually increase about 10 percent from April to June. If late April’s slaughter pattern turns out to be a more accurate prognosticator of hog slaughter than USDA’s March report, then a seasonal price rise from April to June is likely," Mintert said. "If that happens this year, it means that cash prices during June will trade in the mid-$50s.

   If demand holds, summer quarter prices could average near $50, with weekly average peaks in the mid-$50s, he said. But, if slaughter in the summer quarter is down more than the 2 percent, as indicated by USDA’s March report, there is a chance for $60 hogs this summer. Slaughter this fall is still expected to dip 3 to 4 percent below 1999 levels. "If pork demand remains strong, fall quarter prices could also wind up higher than originally projected. Last fall, Iowa-southern Minnesota barrow and gilt prices averaged $36, but this year cash prices could average in the low $40s," Mintert said.

   Break-even prices for hog producers are steadily increasing, but the projected gains in market hog prices indicate positive margins for pork producers this summer, said Rodney Jones, Extension agricultural economist.

   Current break-even prices are close to $40 per cwt. on a live basis, Jones said. Cash hog prices continue to show strength, and current projections suggest average producers will enjoy positive net returns through the summer.

   He estimated average Kansas farrow-to-finish operations are currently seeing modest profits of about $3 per finished pig above all costs on pigs finished in the second quarter of 2000. K-State Research and Extension is a short name for the Kansas State University Agricultural Experiment Station and Cooperative Extension Service, a program designed to generate and distribute useful knowledge for the well-being of Kansans. Supported by county, state, federal and private funds, the program has county Extension offices, experiment fields, area Extension offices and regional research centers statewide. Its headquarters is on the K-State campus in Manhattan.

   Mary Lou Peter Communications Specialist K-State Research & Extension News James Mintert is at 785-532-1518 Rodney Jones is at 785-532-1957 Released: May 12, 2000 Kill Date: May 26, 2000

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Beef Exports Jump, Help Underpin Cattle

 Prices for expansion of on-farm grain 

 storage

   MANHATTAN, Kan. – U.S. beef exports "skyrocketed" in January and February -- coming in 42 percent greater than a year ago, according to USDA data. 

   The jump helped lift cash cattle prices in the first few months of the year but the export data was somewhat overstated, said Kansas State University University agricultural economist James Mintert. Data released by USDA linked 75 percent of the beef export increase in January and February 2000 over 1999 levels to an increase in shipments to Russia, he said. However, beef industry sources indicate much of the beef was actually shipped in late 1999, but not accounted for until early 2000.

     "Still, beef exports to destinations other than Russia during early 2000 increased 10 percent over 1999 levels," Mintert said. "Among major customers beef exports to Mexico were up 30 percent, South Korea 35 percent, Canada 12 percent and Japan 4 percent." "If beef exports remain this strong through the spring and summer, it could help moderate the expected decline in wholesale beef and live cattle prices," he said. 

   Mintert expects cash cattle and beef prices to dip this summer as a result of large placements of cattle on feed this past fall and winter. 

   K-State Research and Extension is a short name for the Kansas State University Agricultural Experiment Station and Cooperative Extension Service, a program designed to generate and distribute useful knowledge for the well-being of Kansans. Supported by county, state, federal and private funds, the program has county Extension offices, experiment fields, area Extension offices and regional research centers statewide. Its headquarters is on the K-State campus in Manhattan. 

   Mary Lou Peter Communications Specialist K-State Research & Extension News Mintert is at 785-532-1518 Jones is at 785-532-1957

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