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The economic uncertainty facing the United States continues to spill over into the beef industry by affecting pricing, production costs and cattle supplies.
"There's a lot more uncertainty today than there has been," said David Anderson, Texas AgriLife Extension economist based in College Station.
Anderson recently provided a livestock market outlook at the 37th annual South Central Texas cow-calf clinic held in Brenham.
The nation's economic troubles have affected cattle and beef prices. As the stock market plummeted, commodities such as corn and wheat followed, he said.
He said that the cost of doing business would continue to be felt in other areas, including input prices for fuel and fertilizer.
Agricultural operators and producers may find it tougher to secure credit from local lenders, experts said.
"I think we're going to be talking a lot more about a credit squeeze beyond the big banks," Anderson said.
The economy, the banking industry, the stability of the stock market, the cattle supply and the costs of feed commodities, fuel, fertilizer and cattle supply are all interrelated.
"And then, where this really hinges, is demand," he said.
Consumer demand for beef, domestically and globally, will continue to play a pivotal role in shaping the nation's beef industry.
Much of the current expansion in beef exports is related to growth in global economies, Anderson said, and strong export demand has helped keep cattle prices higher.
"Exports have been booming. We had a weak dollar. We had growing economies in the rest of the world. We opened up South Korea finally. We're shipping a lot of beef," Anderson said.
Philip Seng, president and chief executive of the U.S. Meat Export Federation, said at the recent U.S. Meat Export Federation strategic planning conference in Tucson, Ariz., that the United States beef export market was strong.
Mexico, Canada and Japan, respectively, were the top three leading U.S. export markets through August, he said.
From January through August, Mexico imported 148,869 metric tons of U.S. beef, up 16 percent from last year. Canada imported 101,040 metric tons, a 33 percent increase over 2007. Japan imported 48,170 metric tons, an increase of 59 percent over last year's total of 30,358 metric tons.
Anderson called exports to Mexico a success story but said the market had softened slightly due to the recent drop in value of the Mexican peso.
"We've done well on the beef side. We've already this summer seen our exports exceed on a monthly basis through July and August what we were doing in 2003," Seng said. "So I think we're encouraged by the good news. But obviously, there is a plethora of bad news out there, and I think the number one question is: Can we sustain the levels of growth that we've enjoyed for the first eight months of this year? I think it's going to be very difficult."
Seng said despite the challenges of an economic crisis and slowing beef demand in the U.S., the world's market would continue to play a significant role and remain an important alternative to U.S. beef.
Corn is one commodity that continues to play a major role in the cost of doing business, from the cow-calf producer to the corn grower to the consumer.
Despite the steep price declines from the record highs of $8 a bushel this year, bushel corn prices are still historically high at $3.90 a bushel. Current prices were at this same level last year.
"What hasn't held steady is what it cost to grow this crop versus last year. The cost of growing a crop has almost doubled," said David Gibson, executive director of the Texas Corn Producers Board, based in Lubbock.
Continuing high input costs have Texas corn producers spending an average of $4 to produce a bushel of corn, Gibson said.
Anderson said he expected all feed prices to stay high because of the cost of growing corn. Also, cattle supplies across the U.S. will continue to shrink. Drought in various parts of the country is contributing to tighter supplies, he said.
According to the National Agricultural Statistics Service field office in Texas, cattle and calves on feed headed for slaughter as of Oct. 1 totaled 2.59 million in Texas, down 9 percent from the same time last year. In the United States, more than 10 million cattle and calves were on feed Oct. 1, down 5 percent.
The number of cattle slaughtered in Texas in September was 557,000, down from 571,000 in August. Across the U.S., cattle slaughter remained steady at 2.9 million for August and September. In July, more than 3 million head were slaughtered in the U.S.
"As we get to January 2009, I suspect we are going to be down probably 300,000 beef cows nationally," Anderson said.
Going into 2009, he said, market prices for cattle might dip lower than in 2008. By the fourth quarter, calf prices should rise simply because the supply side of the industry will remain tight, he said.
He said that short-term prices would trend lower; however, by the fourth quarter of 2009, prices should be higher than average. He projected that every quarter of 2010, on average, would have higher prices than 2009.
"If we keep cutting back the number of calves, the number of cows, the productive part of the market that way, we're looking at higher prices and also a little bit of some recovery the farther out we go in terms of the economy," Anderson said.
