Cattle Market Remains Bright as the.....................

U.S. Inventory Continues to Decline.  The cattle market outlook appears relatively bright as the size of the U.S. herd continues to decline.  In spite of continued moderately strong calf and feeder cattle prices, factors

such as a cold winter, a lingering drought in many areas and ranchers financial conditions, forced another year of herd reductions.  Last year marked the fifth year of herd liquidation since the 103.5 million head cyclical peak on January 1, 1996.  All cattle and calves in the U.S. as of January 1, 2002 totaled 96.7 million head, down 0.6 percent from 97.277 million head on January 1, 2001 and 1.5 percent below the 98.198 million head two years ago  It appears that prices for calves and feeders will likely remain strong as the herd size continues to decline and while the market for finished cattle stalled last November, all prices appear to be showing excellent signs of recovery as the system gets distance from the 9-11 disaster and the economy starts to show signs of recovery.  Futures prices for live cattle on the Chicago Mercantile Exchange for nearby deliver, which dropped to life-of-contract lows in the mid-60's in November are now trading in the mid-70's.

Market analysts have contended that beef has enjoyed an increase in demand during the last few years.  This hypothesis was tested last year and appeared questionable as the market weakened with fewer supplies.  Currently, beef prices in super markets are at record highs and take-offs are relatively steady at these higher prices, even with December's increased production.  While the jury is still out testing this hypothesis, the market recover this winter appears to support the idea that the demand for beef has increased.

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