Corn basis will be more volatile in 2008, and that makes it much more important to manage basis risk on feed input prices, says Darrel Mark, UNL Extension livestock marketing specialist.

"Basis is the biggest thing for cattle feeders to be watching as we get into the feed grain purchasing side," said a University of Nebraska extension specialist.

Mark recommends that producers consider cash forward contracts or basis contracts to manage that increasing basis risk. "While hedging in the futures and options markets are useful tools," Mark says, "they don't protect against basis risk. Further, they aren't as useful in procuring cash grain, which could be an issue as locally available supplies diminish in upcoming years."

Mark says that cattle producers will face some demand side challenges in 2008. Higher energy prices tend to depress beef demand, especially on higher end products.

Another concern is lower priced competing meats. Relative to beef, pork and poultry production are both up, he said and prices will create competition for the beef sector.

On the other hand, he says, the export market has improved and will be a bright spot for beef producers in 2008. The political climate seems comfortable for those increased exports for the near future.

An extended drought cycle has precipitated increases in cow slaughter numbers and decreased heifer retention, according to Mark. The result has been a much smaller domestic calf crop. The tight feeder cattle supply has pushed feeder cattle prices up, but those prices are susceptible to corn prices.

"I think we're going to see a lot of reaction to that in 2008," he says.

On the other hand, the supply side of cattle on feed is at a new record high. Those numbers are influenced by less light-weight cattle staying on wheat pasture during the past two years, particularly last year in the southern plains. Another factor is imported cattle from Canada. Mark says that high grain prices in Canada have driven exports to the U.S.

Fore more information about cattle and grain markets and how to manage them, go to Mark's web site at agecon.unl.edu/mark/.