Can record cattle prices continue?Price prospects strong in 2013 if moisture returns to normal, beef cattle slaughter declines.
FARGO, N.D. — For the third year in a row, prices for all market classes of beef cattle set record annual highs in the U.S. and North Dakota in 2012.
Are record highs possible again in 2013?
The short answer is yes, but remember that prices for each market class have different seasonal variations, so at times, 2013 prices for some market classes (feeder calves in particular) likely will be below last year. Furthermore, many fundamental factors can affect prices, and some are unexpected.
For example, in 2012, the lean, finely textured beef media event, another case of bovine spongiform encephalopathy in a U.S. cow and the worst drought in the Corn Belt since 1988 all surfaced.
Smaller supplies of beef, competing meats and cattle will be supportive to prices in 2013. The U.S. Department of Agriculture is projecting beef production to decline 5 percent in 2013 and all red meat and poultry supplies to be down 2.6 percent.
Because there was drought in the Southern Plains in 2011 and more widespread U.S. drought in 2012, the beef cow herd likely will be down 1 to 2 percent in 2013, resulting in a correspondingly smaller calf crop.
Besides the smaller calf crop, two additional factors will contribute to lower trending U.S. supplies of feeder cattle and cattle slaughter: fewer feeder cattle imports in 2013 (especially from Mexico), and increased retention of heifers and cows for breeding purposes (assuming more normal moisture conditions).
Live cattle futures are indicating another record year for fed cattle prices. Strong hide and offal values and beef export values will be supportive to fed-cattle prices. But the U.S. economy continues to struggle and will need to improve in 2013 to support fed-cattle prices at the projected futures market price levels.
Cattle price carryover?
Cow prices were at record highs during all of 2012 and likely will continue to be at record highs in 2013, especially if normal moisture prevails and beef cow slaughter declines. Steer calf prices ended 2012 near last year’s record levels.
Prices likely will not be as high as last year early in 2013 because of the drought that continues to plague much of the country. Should the drought subside and spring and early summer grazing conditions improve significantly, calf prices could challenge last year’s levels by April or May.
Fall 2013 calf prices are dependent on corn prices. A good corn crop and lower corn prices would support calf prices at higher levels, but another poor corn crop and higher corn prices would cause lower calf prices than we had the past two years.
The heavier weight backgrounded feeder steers are selling a little higher than last year, but also likely will be a little under last year’s record prices for the first couple of months of 2013. An increase in fed-cattle prices and a further decline in corn prices would be supportive to higher prices, but struggling fed-cattle prices and a higher corn market likely would depress prices.