January 21, 2014
US cattle, beef prices rise further
Triggered by a tight supply of cattle due to a declining calf crop for 17 years in a row, US cattle and beef prices continue to set records.
Cattle supply is becoming even tighter with cattlemen retaining heifers in an attempt to rebuild the herd. Cattle and beef markets continue to set records, leaving some analysts wondering how high prices can go.
Feeder cattle, slaughter cattle and beef cutout values are all at record prices and climbing. Feeder cattle and calves last week sold US$3 to US$10 higher per hundredweight (cwt) with instances as much as US$20 higher compared with the week ending December 20, the last good market test before the holidays, the USDA Agricultural Marketing Service (AMS) reported on January 10.
Top quality steers averaging 638 pounds at the Bassett, Nebraska, auction that week brought US$211.34 per cwt, and fancy steers averaging 581 pounds brought US$229.41 per cwt, AMS reported.
Prices for 600- to 700-pound steers averaged almost US$188 per cwt in the North Central region and nearly US$197 per cwt in the South Central region, the agency reported.
Live fed steers for slaughter for the week ending January 11 averaged US$139.54 per cwt, up US$2.08 per cwt from a week earlier and up US$13.50 per cwt from a year earlier, University of Missouri economists reported.
Choice cutout values for beef closed the week trading at US$214.61 per cwt, up US$12.34 from the previous Friday (Jan 3) and US$20.39 more than a year earlier, the economists reported. That cutout value jumped to US$228.79 per cwt on Thursday (Jan 16), according to USDA-AMS.
High prices are no surprise but they are impressive, market analysts said. Prices keep going higher, but it just shows the industry is really tight on supplies, said Wilson Gray, extension livestock economist with University of Idaho in Twin Falls.
Harsh winter weather that affected slaughter plants and transportation has attributed to the recent jump in prices, but cattle supplies are tightening with cattlemen looking for replacement heifers or holding back heifers, he said. Fed and feeder cattle prices have been at record highs for the last several months, he said.
Climbing prices are part of a lengthening trend, said Ron Plain, an agricultural economist at the University of Missouri. Last year was the fourth consecutive year of record high cattle prices, and 2014 should be the fifth, he said. The number of cattle is down, reflecting a calf crop that has declined for 17 years in a row, he said.
The supply decline started more than 10 years ago with cattlemen unable to make a profit and continued with the drought and high feed costs, he said. Some of the particulars include the discovery of bovine spongiform encephalopathy in a US cow in 2003, which hurt exports; the 2008-2009 recession, which softened demand; high feed costs; the conversion of pasture to crops to capture high crop prices; and severe drought in the Southern Plains in 2011 and the whole Midwest in 2012, he said.
With beef production down 5% compared to a year ago, prices in 2014 should push even higher, strong exports to meet a growing global demand and an improving US economy, he said.
John Nalivka, owner of Sterling Marketing, a Vale, Ore., consulting firm for the red meat industry, said continued strong markets are not hard to fathom but he has a little trouble believing they will continue to escalate.
Feedlots are back in the black with margins of US$122 a head last week, compared with US$80 a head a week earlier and losses of US$48 a year ago. But the high fed steer prices make it a little tough for packers, which are doing better but still losing almost US$44 a head last week compared with about US$76 a week earlier.
Even with per-head profits or narrowing losses, things are tough for feedlots and packers, which are doing less business with far more capacity than there are cattle to slaughter, Plain said.
Really high retail prices could cause consumers to switch to pork and poultry, but so far consumers aren''t backing off of beef, Gray said.
Prices could back off in 2015, as competing meat producers are growing production, and 2014 could be as high as prices get in this cattle cycle, Plain said.