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CattleFax Delivers Cattle and Beef Price Outlook

Expect price volatility for feeder cattle, a wider Choice-Select spread and record prices, says analyst Kevin Good.

by Troy Smith for Angus Journal

TAMPA, Fla. (Feb. 8, 2013) — Prices for U.S. cattle and beef are expected to reach record-high levels in 2013. That was the forecast presented during the CattleFax Annual Outlook Seminar convened Feb. 8 during the 2013 Cattle Industry Convention in Tampa, Fla. CattleFax market analysts talked about forces expected to influence prices, naming drought as having a huge impact on beef supplies.

 

They talked about how the Southwest’s lingering drought spread last year to parch an even larger portion of cow country. The result was lower forage production on grazing lands and lower yields of harvested forage, which further boosted already-high feed prices. Despite chances for regional relief in 2013, forecasters say drier-than-normal conditions may persist in some areas and particularly in the Central Plains.

 

The current lack of moisture and only slim chances for significant improvement mean U.S. cow numbers are likely to decline further from the current tally of just more than 29 million head — the lowest since 1952. A smaller supply of cattle translates to a reduction in beef supply. While domestic beef demand has slipped a bit, export demand for U.S. beef has grown. Access to new foreign markets and expanded exports to others means global demand should more than make up for any diminished domestic demand.

 

“Global beef supplies (excluding India) are expected to drop by 2%,” said CattleFax analyst Kevin Good. “That will drive our outlook.”

 

According to Good, declining fed-cattle numbers, stronger exports and higher prices for competing proteins should support higher beef cutout prices in 2013. He said he expects prices to average $196 per hundredweight (cwt.), which is 4% higher than the year prior. Good said fed-cattle prices should average higher for the fourth consecutive year, ranging from $116 to a high near $134 per cwt., and averaging around $126. The price spread between Choice and Select beef is expected to widen.

 

Tighter supplies of feeder cattle and excess feeding capacity mean prices for feeder cattle may increase by nearly 6% this year. Good expects considerable price volatility, however, in response to shifts in prices for corn and futures contracts. He looks for a range of $140 to perhaps $165 per cwt., and an average price of $155 for 750-pound feeder steers.

 

While the impact of drought will influence profitability for many cow-calf producers, Good’s forecast for calf prices was positive. At the top end, prices could exceed $200 per cwt., with 2013 prices averaging $175.