Cattle prices climb as herd numbers fall
Finished cattle prices in fall 2013 climbed to $130 in anticipation of small beef supplies in 2014, says Purdue Extension agricultural economist Chris Hurt.
Per capita beef supplies, or the amount of beef available per person in the U.S., likely will be down by about 5% for the rest of this year and on into next, says Hurt.
High cattle prices combined with low feed prices - corn hit $4.32 per bushel on Oct. 14 - likely means the small number of available calves could be placed on feedlots at lighter weights than a year ago when feed prices were high.
"Lower priced feed and the expectations for increasing finished cattle prices over the next four to five months should also encourage feedlot managers to feed to heavier weights," Hurt says.
Low cattle numbers mean feedlots and packing facilities have a lot of unused capacity. Capacity is a fixed cost that doesn't go away with limited cattle supplies.
"The combination of excess capacity and high fixed costs means that both will tend to bid strongly for the limited cattle numbers," Hurt says. "Ultimately, this strong bidding gets back to the brood cow producer in the form of record-high calf and feeder cattle prices.
"Unfortunately, these conditions also mean that the margins for both packers and feedlots, while better than in the past year, will still be narrow and likely less than their total costs."
Strong cattle prices and aggressive bidding by feedlots and packers are likely to lead to a year or more of additional downsizing.
Some cattle producers in areas with healthy pastures could start retaining heifers as early as this fall. But in dry regions, which represent about 45% of the brood-cow herd, expansion won't begin until weather becomes more favorable and pastures recover.
"If beef cow numbers begin to slowly turn upward in 2014, downsizing of cattle feeding capacity might end in 2015 and the packing industry by 2016," Hurt says. "The years beyond 2016 should provide some expansion for the beef cattle industry, but still a slow upward growth.
"A slow upward trend is not highly optimistic, but much better than declining trends of recent years."
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