Why were cattle prices strong in 2007?

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Kansas slaughter steer prices are on track to establish a new record high of about $93/hundredweight in 2007. Current forecasts suggest that prices could set another record high in 2008.
In that context, it’s useful to look back at 2007 to figure out why prices were so strong.
One key. One of the key factors that helped support live cattle prices at such a high level during 2007 was a dramatic narrowing in the spread between wholesale beef and live cattle prices. This becomes more clear when year-to-year changes in wholesale beef and slaughter steer prices are examined.
Through early December, Kansas live steer prices averaged $92.94/hundredweight up 7.9 percent from the same period in 2006 when they averaged $86.13/hundredweight
In contrast, over the same time frame wholesale Choice boxed beef prices averaged $149.87/hundredweight in 2007, just 1.9 percent more than in 2006.
Processor margins. It’s clear from looking at the shift in the two price series that processor’s operated with much narrower margins in 2007 than in 2006.
The Livestock Marketing Information Center (LMIC) calculates an estimated live

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