By CAROL RYAN DUMAS
With the global beef supply hovering around 2012 levels, Rabobank economists expect record-high global beef prices in 2013.
In its December Beef Quarterly report, the company also predicts relatively weak consumption due to the still sluggish economy. That scenario will be worse in North America and the European Union, where beef production is set to decrease and beef companies will struggle to pass on higher cattle prices to consumers.
A bullish factor for the industry, however, is that poultry production is likely to decrease due to negative producer margins in the wake of severe feed costs increases. If that decreased production raises poultry prices and the gap between beef and chicken prices narrow, it could shift demand to beef, Rabobank reported.
In the U.S., retail beef prices posted several record highs in 2012, and consumer demand has held up remarkably well, the company's food and agribusiness research and advisory group said.
"It will be critical to see if consumers stay committed to beef with additional record prices expected in 2013," the group said.
Rabobank expects fed cattle prices to trade at a base of $130 per hundredweight in the first half of the year with spring highs of $140 to $145 per hundredweight, compared with expected fourth quarter 2012 prices of $125 per hundredweight.
Sustained losses in the feeding sector and a continuing short feeder cattle supply has had feedlot placements down most of 2012 and below year-ago levels for the past five months. As a result, fed cattle supplies will show a noticeable decline shortly after the first of the year, with declines escalating at least through the grilling season, the report stated.
Weather has been the determining marketing influence for feeder cattle in the last 18 to 24 months, sending calves to feedlots sooner and raising feed costs for feeders, but it might just have been a warm-up for market developments in 2013, Rabobank reports.
If drought conditions hold or worsen to a point that the 2013 corn crop is threatened, feeder cattle will trade dramatically lower and further cattle liquidation is likely to occur.
On the other hand, normal to favorable weather conditions that recharge pasture and assure feed-grain supplies could easily cause all-time record-high feeder cattle prices.
Either scenario could continue the pressure on cattle feeders, who have suffered sustained losses due to short feeder supplies, excess capacity and high feed costs.
Rabobank did not return phone calls on Monday morning.