Low supplies underpin high cattle market
The outlook for Northwest cattle markets remains favorable, with high prices supported by low supplies, low feed prices and continued strong demand domestically and internationally, according to Northwest Farm Credit Services.
Both cattle and beef markets remain strong and are expected to find continued support as cattle supplies are exacerbated by expected heifer retention for herd expansion, Northwest FCS reported in its quarterly market snapshots, released July 10.
Prices were strong across all classes of cattle at the end of the second quarter, with 550 pound steer calves reaching a record $237 per hundredweight in June — a 52 percent increase from a low of $155 per hundredweight in June 2013, the company reported.
Feeder steers have followed a similar lofty trend, hitting a record-high of $199 per hundredweight in June and continuing to post record highs. Fed cattle prices dipped in April and May after reaching a record-high $150 per hundredweight in March but rebounded to $147 per hundredweight in June. A decline to seasonal summer lows, however, is expected, the report stated.
Tight domestic cattle supplies, U.S. beef demand and beef exports continue to support record beef prices. U.S. beef prices have increased 12 percent to 13 percent thus far in 2014, with retail choice beef selling for a record-high $5.91 per pound in May.
Despite the high prices, buying trends indicate consumers are comfortable with the current prices, likely due to the rising cost of competing proteins. Pork prices have risen 15 percent so far this year, primarily due to supply constraints caused by PEDv epidemic, Northwest FCS reported.
Imports of cattle to the U.S. rose 5 percent year over year in the first quarter, and imports of Canadian cattle are up 12 percent thus far in 2014 to help meet demand. That import demand is expected to remain strong, but growth will be limited by a short cattle supply, particularly in Mexico where low inventories continue.
U.S. beef exports are also contributing to record-high beef prices, with exports up 49 million pounds to Hong Kong and 41 billion pounds to Mexico year to date. Hong Kong’s recent agreement to open its borders to even more U.S. beef will support additional export growth, the report stated.
On the input side, the outlook for cattle producers is mixed, according to Northwest FCS.
Corn prices received by growers in December ($4.41 per bushel) were the lowest they’ve been in three year but have since rebounded more than 9 percent to $4.71 in May. USDA projects the June price will be $4.37 a bushel.
Prices for Northwest feeder hay are strong, ranging from $160 to $200 per ton, with drought-stricken California cattle producers continuing to drive up the price.
As for fuel prices, the U.S. Energy Information Administration reported gas prices have risen 6 cents a gallon and diesel prices have risen 5 cents a gallon since June 2013 to $3.77 and $3.92 a gallon, respectively in the first week of June.
Northwest FCS is expecting favorable markets for cattle producers in the second half of 2014, with high prices, low supply, low feed costs, and continued demand for both cattle and beef.
Key variables going forward include cattle availability, feed costs, consumers’ willingness to accept higher beef prices, and the direction of cattle prices, the company stated.
Inquiries to Northwest FCS were not returned July 10.