INDUSTRY OUTLOOK FOR 2002

            "Cattle feeders have faced a severe equity drain the last part of 2001 and it's likely the effects of this market situation will continue at least through the first quarter of 2002 and possible into the second quarter," according to Jim Gill, market director for the Texas Cattle Feeders Association (TCFA).  Gill gave his outlook for the cattle feeding industry during TCFA's annual Year-End News Conference today in Amarillo.

          A combination of low fed cattle prices and high feeder cattle prices is the main cause of the equity loss this year, he said.  "Feeder cattle supplies will continue to tighten over the next couple of years, reflecting the liquidation that has been in effect since 1996.  Prices for a 750-lb. feeder steer, which averaged near $88 in 2001, will average in the low to mid $80s during 2002 due to the large equity loss the feeding industry experienced in 2001."

            Gill estimates fed cattle will sell on the cash market for $62 to $76 in the first quarter; $74 to $78 in the second quarter; $70 to $76 in the third and $76 to $80 in the fourth.

             Beef production should tighten in 2002, he predicts, coming in around 25.3 billion pounds, 3% below 2001.  "This will be the second decrease in beef production since 1993 and will put annual consumption near 66.5 lbs. down 2.1 lbs. from this year." 

One of the market factors that cattle feeders have contended with is heavy cattle and record carcass weights.  "Average carcass weights are expected to continue higher than normal but will drop below record levels.  Reduced placements during the next few months will reduce the supply of fed cattle available for market during late winter and early next spring."

However, the market will feel the pressure of competing meat supplies.  "Increases in pork and poultry production will offset the decrease in beef production, brining total meat and poultry production close to 83 million pounds, a 0/5% increase over 2001.  Pork production will be near 19.4 billion pounds, up 2.5%, and poultry production will hover around 38 billion pounds, up 2.4%.

What does all this mean for consumers?  "The uncertainly in the beef complex makes for uncertainty at the retail lever as well," Gill said.  "Retail beef prices averaged $3.38 per pound in 2001, up about 30¢ from last year's $3.06.  An unexpected turnaround in beef demand in the U.S., coupled with improving export markets, pushed prices high in early 2001."

But recent drops in export demand due to BSE in Japan are treating the entire market complex with a heavy hand, Gill said.  "If export demand recovers during early 2002, the the average retail price will likely be near the $3.38 recorded in 2001.  If export demand does not recover, then prices may fall back near the $3.06 level of 2000."

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