Economist: Higher cattle prices ahead
'In the livestock market, what we are doing is trying to make it to the fall'
By MITCH LIES
NASHVILLE, Tenn. -- Cattle prices will increase over the course of 2013 as a record corn crop is harvested and exports stay strong, a Texas A&M University extension economist projected.
Speaking at the 2013 annual meeting of the American Farm Bureau on Jan. 14, David Anderson said high feed costs and drought reduced herd sizes and lowered cattle prices in 2012.
But with corn plantings again expected to top 96 million acres, even with an average yield, the crop should reach record levels and feed prices should drop, Anderson said.
"As you look at that many acres being planted, you don't have to have (an average yield of) over 160 bushels per acre to have a record crop. It just doesn't have to be as awful as it was last year," Anderson said.
"In essence, in the livestock market, what we are doing is trying to make it to the fall, make it to the next corn crop ... and then going forward from there," Anderson said.
The U.S. cattle inventory dropped to its lowest level in 60 years last year, Anderson said. And Anderson expects the inventory to continue to decline, largely because of drought.
"Calf prices are at a level I think most people are seriously thinking about expanding their herd, but if there is no grass, you aren't going to expand," he said.
Anderson downplayed concerns over declining per capita consumption of beef in the U.S., saying the decline is largely a function of a drop in supply.
The willingness of consumers to purchase beef at high prices shows beef is still a popular food among consumers.
Also, he said, as per capita income rises in Asia and other parts of the world, exports should continue a recent trend of increasing.
Anderson also downplayed concerns that fluid milk consumption is down among consumers, saying that while that is true, cheese consumption is up dramatically over the past 30 years.
Still, high feed prices proved disastrous for dairy producers in 2012, he said.
"On the dairy side, 2012 was (a) wreck," he said, "not from collapsing milk prices like in 2009, but from skyrocketing feed costs and drought."
Dairy cattle inventory has dropped substantially in recent months, he said, which could lead to lower milk production in 2013.
Provided exports stay strong, Anderson said dairy producers could see increased prices in 2013.
"I expect to see Class III prices averaging a lot closer to $20 (a hundredweight)," he said. "But if exports don't pan out like I think they are going to, then we are going to have low milk prices."