Juggling tennis balls or beanbags is easy compared to juggling a variety of objects which are not uniform in size, shape, or weight. But that is the current challenge in the cattle market as livestock operators evaluate a variety of fundamentals which are all pushing and pulling on prices. A month ago cattle feeders were still faced with high feed prices, but a lot has changed in the past several weeks.

The fundamentals in the cattle market are nearly all in various stages of transition and going in different directions. But USDA’s latest Livestock Outlook helps with the understanding necessary to make needed adjustments in marketing plans.

The value of the US dollar has been at relative low levels for a number of months, which has helped with the beef export trade, which reached 221 million pounds in August when Korea recorded a full month of US beef imports along with some Russian business. Total exports were up 33% as a result of the more liberal trade and the currency rate.

But the value of the dollar has been increasing in the wake of the global financial upheaval, and that will create a pair of negative fundamentals. The stronger dollar will slowly dampen exports of US beef and slowly strengthen imports of foreign livestock and meat products, which have been at reduced levels lately. Imported beef is down 18% from last year, but USDA expects it to rise in 2009 to 7% more than 2008 levels.

However, when the value of the dollar is compared to the currency in our foreign markets, there are still some advantages for our export market. US beef in Japan is still relatively inexpensive, and demand is rising in Korea, despite the currency issue.

At the same time currency issues are impacting the beef market the cattle herd continues to decrease and domestic cow slaughter continues at a high rate, continuing the downtrend in herd numbers in future months. Calf slaughter, both for dairy calves and beef calves, is also at a high rate, in part due to the cost of both grain and forage in some areas.

Feed costs are causing some producers to put calves on feed later. USDA’s analysis indicates May of 2007 was the last profitable month, and as late as September 2008, there was a $10/cwt loss. Because of the shorter periods on feed, the market is expecting marketings to be more bunched, and that causes price volatility.

As corn harvest begins, the prospect is for increased supplies of livestock feed, according to USDA’s latest Feed Outlook USDA has increased its estimates for acreage, yield, and production from last month, causing some decline in grain prices. Livestock feeders, who have been competing with the ethanol and export industries for grain, will see more corn available for cattle feed as exports hold steady and ethanol production declines. The farmgate price for corn was lowered 80 cents per bushel from the September to October crop reports. Hay, sorghum, and barley production are up as well.

While agricultural credit has been minimally impacted by the global financial problems, USDA reports that some banks are requiring higher levels of equity in feeder operations for lending. That will have a negative impact on some operations, and some may be forced into higher interest financing or suspend operations. Reduced profitability or fewer operating feedlots will also be dynamics impacting the market.

The beef market is in a seasonal decline with product values lower due to slower demand from the restaurant hotel trade and increasing competition from pork and poultry.

Summary:
The cattle market is being driven by a large number of different fundamentals, all working at odds with each other. The increasing value of the dollar will dampen exports, but not to all countries, and will allow a small increase in imports. Feed supplies are increasing and costs are dropping. The cattle herd continues to decline, with cow slaughter increasing along with calf slaughter. Feeder calves are being kept on pasture longer in an effort to reduce feed costs, but that can cause some volatility in market prices. Profitability is still not here yet, but may be getting closer.