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Lofty cattle prices expected to continue

Carol Ryan Dumas

Capital Press

Record high fed cattle prices last week and lofty beef prices are expected to continue at least through 2014, according to economists. Low cattle numbers, fueled by drought and high feed costs in the last several years, will continue to tighten due to fewer calves and herd rebuilding.

Historically tight supplies of cattle drove cash fed-cattle prices to a record high last week.

Fed cattle headed for slaughter averaged $132.30 per hundredweight, up $2.91 per hundredweight from the previous week and up $5.69 from the same week last year, said Ron Plain, livestock economist with the University of Missouri.

That broke the last record high of $128.92 on a live-weight basis, set the week ending March 2, 2012.

Boxed beef is also at lofty levels, with the choice cutout last week averaging $200.09 per hundredweight, up $3.93 per hundredweight from the previous week, though not as high as the record $211.37 in May of this year.

The most recent data on grocery store prices shows beef prices were at record highs in July and August, Plain said.

“I think we’re starting to see things in relationship to how small cattle numbers are,” said Wilson Gray, livestock economist with the University of Idaho.

The U.S. cattle herd on Jan. 1 numbered 29 million, the lowest since 1962. Carcasses are heavier, but with fewer cattle, beef production is still lower. Per capita production of beef, at 53 pounds to 55 pounds, is down 10 pounds from five or six years ago, he said.

In addition to fewer cattle, prices for heifers sold for replacement are higher than those going to market, indicating an interest in herd rebuilding. That will further tighten the market for fed cattle and beef, and if that rebuilding effort proves successful, more producers will start holding back heifers next year, he said.

With cattle and beef supplies continuing to tighten, high cattle and beef prices aren’t going away any time soon, the economists said.

In fact, there are likely to be new price records set in 2014. Cattle and beef prices in 2014 will be higher than this year and higher than in 2015, they said. This year will be the fourth consecutive year of record-high beef prices and 2014 will be the fifth, Plain said.

“I think that’s as far as we can push. It’ll be tough for beef prices to set new records when competing meat prices are falling,” he said.

By 2015, prices should start declining due to competition from chicken and pork. Chicken production is already expanding and pork has the ability to expand relatively quickly. That competing production will bring beef prices down even before beef production picks up, he said.

Chickens only take 10 weeks from egg set to slaughter and pork takes 10 months from breeding to slaughter, compared with cattle, which takes 2 1/2 years from breeding to slaughter, he said.

In addition, there’s the bigger picture of beef demand going up and down with the economy. The recession that hit in 2008 took a big toll on beef consumption that year and in 2009, and recessions occur about every seven years, he said.

Gray, however, doesn’t see prices moderating until 2016 or 2017 when markets start seeing more cattle as a result of herd rebuilding. And he’s not worried about competing meats until then, he said.

The recession has caused consumers to back off higher priced cuts of beef, but they’re still buying beef. And while the poultry industry is expanding, the pork industry has had some disease issues that have affected production, although it could ramp up, he said.

“I don’t think we’re going to see (beef) prices moderate from lack of demand; supplies are pretty low,” he said.

But those low supplies could drop per capita beef production to 50 pounds. When beef production picks up in three or four years, the question will be how beef can regain some of the ground it gave up, he said.



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