According to Purdue University's Chris Hurt, cattle producers shouldn't start panicking just yet.

"Odds favor a recession and not a depression," says Hurt, an Extension marketing specialist.

Hurt adds that understanding the magnitude of the recession is becoming easier as the impacts of the past few weeks affect consumer spending, business investment decisions, and trade.

"Markets often anticipate the worst, and if the worst does not occur, there is some recovery," Hurt anticipates. "That may well be the direction for the cattle markets as well. If so, this would enable cattle prices to recover several dollars per hundred, but feed prices would be expected to rise as well."

Hurt recently reviewed the cattle market which, along with U.S. agriculture in general, is caught in the web of uncertainty created by the financial crisis of 2008.

"The cattle industry is no exception, as both domestic and foreign demand for beef is related to consumer incomes," he notes. "Where the U.S. and world economies go is expected to plot the direction for cattle prices. As a consequence, beef supply fundamentals seem less important to prices, at least for now."

Looking forward, the current decline in feed prices has been a huge advantage in reducing costs of finishing cattle and helped to keep the declines in calf prices more moderate, he added.

"Feed prices have fallen by a much larger percentage than have cattle futures," Hurt says. "During the last three weeks, December corn futures fell by 25%, with December soybean meal futures down 20%."

Beef demand and cattle prices are directly impacted by consumer incomes. The current financial crisis may reduce those incomes and, therefore, cattle prices.

"The last two recessions in the United States were very mild," explains Hurt. "This recession may be more severe, more like the recessions of 1974 and 1975 and again in 1981 and 1982 when real Gross Domestic Product dropped near 3%."

He continues, "A drop of that magnitude this time could have a $4.50 to $5 per hundredweight negative impact on live cattle prices, not as much as prices have already dropped. This would suggest that the live cattle futures decline of $10.25 per hundredweight over the past three weeks is too much."

At present, the leading indicator for the cattle sector is probably the stock indexes. If there is a general improvement in global financial concerns, those will be quickly reflected in stock prices. Indicators today say that the credit crisis is easing somewhat and money flow between banks is beginning to improve some.

For the cattle producer, Hurt said buying feed at this time is a consideration with both harvest and a financial crisis weighing on grain prices.

Hurt says recovery in finished-cattle prices to the low-to-mid $90s would seem to be the most likely possibility in coming months. A recovery of $5 to $7 per hundredweight might be appropriate to expect for feeder cattle and calf prices as well.