Beef cattle production is one of the bright spots in Kentucky's agricultural economy with strong prices that look to continue through at least 2001 and beyond.

"The most important factors driving the feeder cattle market are low feed costs, strong beef demand and expectations of high slaughter cattle prices in 2001," said Lee Meyer, University of Kentucky Extension livestock marketing specialist.

Beef demand is up 4 percent over the past year primarily because of the food service industry such as restaurants.

While demand is high the numbers of feeder cattle available continues to decline, with continuing declines in cow numbers and large numbers already in feed lots.

If producers begin to expand their beef operations by retaining heifers for their breeding herds, the supply will tighten even more, Meyer said.

Cattle numbers have been declining since 1996. Most analysts have been expecting the profitable calf prices to lead to expansion of cow numbers. This has not happened and may be due to drought conditions in some western states. Kentucky producers and those in other Southeastern states are in an enviable position. They are having an excellent production year.

It is most likely that the expansion of the cow herd which will eventually lead to larger supplies is just beginning. Increases in beef production will not hit the market for two to four years.

For calf prices that means high prices are likely to hold for the next two to four years, Meyer said.

Feed costs and the overall economy could impact profitability. If the grain crop in 2001 is threatened, it would raise the cost of finishing cattle and hurt demand for feeders. Also, the general economy appears healthy, but any recession would have a dramatic impact on beef demand and cattle prices at all levels.

Other factors likely to impact the markets are the advent of individual animal identification, e-commerce and new product development, Meyer said.

Many Kentucky cattle producers have forgotten the drought of 1999, and with strong markets for calves this year and prospects of continued profits, there is a lot of optimism.