For Immediate Release Dec. 20, 2000

For More Information: Burt Rutherford or Jim Gill

INDUSTRY OUTLOOK FOR 2001

"Cattle feeders are ending the year with a stronger market than many anticipated, and Santa Clause himself couldn't have done any better." That's how Jim Gill, market director for the Texas Cattle Feeders Association (TCFA), summarized the year during the annual TCFA Year-End News Conference today in Amarillo.

"In many respects, 2000 was a turnaround year for cattle feeders," Gill said. "Large numbers of market-ready cattle and record large weights plagued feeders much of the year. But it appears we've turned the corner and 2001 looks very positive."

Gill estimates fed cattle will sell from $72 to $78 per cwt. in the first quarter of 2001; $70 to $75 in the second quarter; $68 to $72 in the third quarter and $76 to $80 in the fourth.

Cow-calf and stocker operators will enjoy continued market strength as well. "Feeder cattle supplies will continue to tighten over the next several years. Prices for a 750-lb. feeder steer, which averaged near $85 in 2000, will average in the low $90s during 2001," Gill predicted.

Cattle prices will take a cue from beef production, which will be near 26 billion pounds in 2001, 3.1% below 2000, he said. "This will be the first decrease in beef production since 1993 and will put annual per-capita beef consumption around 66.5 lbs. on a retail weight basis." Gill says the drop in beef production will stem mainly from the expectation that average carcass weights will fall back from the record 745 lbs. notched in 2000. "We placed a lot of lightweight calves the last half of 2000 and particularly the last three months. Lighter weight calves produce lighter weight finished cattle, which yield lighter weight carcasses."

However, competitive meat supplies will remain a challenge. Increases in pork and poultry production will offset the decrease in beef production, bringing total meat and poultry production to around 83 billion lbs., a 0.5% increase over 2000. Pork production will be near 19.4 billion pounds, a 2.5% increase, and poultry production will be near 37 billion pounds, a 3.4% jump.

Grain prices, which played a major role in 2000, will continue to be a factor in cattle feeders' purchasing and placement decisions, Gill said. "Corn production in 2000 was estimated at 10.05 billion bushels, up 6.5% from 1999. Production in 2001 will likely again be around 10 billion bushels. Changes in the farm program could eventually influence grain production, but it's unlikely to have much effect in the 2001 crop year."

by

Jim Gill
Market Director
Texas Cattle Feeders Association
December 20, 2000

Fed Cattle Price Outlook by Quarters

First Quarter----------$72 to $78 Third Quarter-----$68 to $72
Second Quarter------$70 to $75 Fourth Quarter---$76 to $80

Beef production in 2001 will be near 26 billion pounds, 3.1% below this year's level. This will be the first decrease in beef production since 1993 and will put annual per-capita consumption near 66.5 lbs. on a retail weight basis. Average carcass weights are expected to be lower than the record 745 lbs. in 2000, due mainly to lighter weight calves going on feed the last half of 2000. Lighter weight feeders produce lighter weight finished cattle, which yield lighter weight carcasses.

Increases in pork and poultry production will offset the decrease in beef production in 2001, bringing total meat and poultry production close to 83 billion pounds, a 0.5% increase over 2000. Pork production will be near 19.4 billion pounds, an increase of 2.5%. Poultry production will be near 37 billion pounds, a 3.4% increase.

Feeder cattle supplies will continue to tighten over the next several years, reflecting the liquidation that has been in effect since 1996. Prices for a 750-lb. feeder steer, which averaged near $85 in 2000, will average in the low $90s during 2001. Continued liquidation due to drought and placements of lightweight cattle on feed during 2000 due to attractive grain prices will reduce an already tight feeder supply even more in 2001.

Corn production in 2000 was estimated at 10.05 billion bushels, up 6.5% from 1999. Production during 2001 will likely again be near the 10 billion-bushel level. Changes in the farm program under a new administration could eventually influence grain production, but it is unlikely to have much effect in the 2001 crop year.

Retail Beef Prices

Retail beef prices averaged $2.95 per pound in 2000, up about 10 cents from last year's $2.85. An unexpected turnaround in beef demand in the U.S., coupled with improving export markets, pushed prices higher in 2000. With the anticipated drop in beef production in 2001 and continued improvement in demand, prices may edge higher and reach an average of slightly more than $3.00 per pound during 2001.