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Coming Soon, to a Salebarn Near You: Record calf prices

Get ready for the best cattle markets . . . EVER! They are
already happening in a neighborhood near you.

Fed steers are at $1.10 a pound, stocker cattle at $1.25,
and most notable and significant (maybe) 500-pound calves are at or over $1.50.
From some standpoints, it’s the golden age of the cattle industry!

But it is happening mostly for one not-so-great reason:
cattlemen keep exciting the business in droves, and the nation’s cowherd shrinks.
It’s a story that is happening pretty much around the world, wherever cattle are
fed.

It’s really the ultimate good news-bad news story that was
told at the CattleFax outlook seminar at the National Cattle Convention this
week. Cattle prices are good, but it’s because a lot of herds died to get us
here.

Here are the highlights told by the CattleFax staff.

  • All remains bullish, on both the supply and demand sides
    of the industry. CEO Randy Blach told cattlemen that global economic recovery
    is happening faster than in the U.S., with the Korean stock market up 24% last
    year. We had a 20% improvement in beef exports, and beef demand was up 7% due
    to our strengthening economy. Feedlot profits were the best since 2003, packers
    had an excellent year, and for cow/calf producers, payday is just beginning.
  • Cattlemen need to consider ways to reduce their risk in
    the corn market, Mike Murphy told the group. It’s too volatile now, and prices
    for feed too high, not to manage in a way that will protect you from further
    price advances. CattleFax thinks corn can, and probably will, trade a dollar
    higher than current on a spring or early summer rally. “We need a good growing
    season,” said Murphy. “And we need 4 million additional acres of corn. Anything
    short of that is not enough.”
  • Despite slow growth in the U.S. economy, per capita income
    world wide is now back to pre-recession levels, said Brett Stuart. In China,
    per capita income was up 8% last year. Korea has become a huge buyer of U.S.
    meat, partly due to the Foot and Mouth Disease there. They’ve incinerated 2.3
    million hogs and several hundred thousand cattle as a result. “If we can get
    back to pre-BSE exports to Japan, it will add $40 a head to our cattle markets,”
    Stuart said.
  • To begin to grow our beef herd, we need to retain cows and
    keep more heifers. But high cattle prices are working against that, said Kevin
    Good. He thinks cull cows could bring up to 70¢ a pound this year, a record,
    and some small farmers may cash them in, further depleting the breeding herd. Per
    capita beef supply in the U.S. will be down around 55 pounds in 2012, the
    lowest in decades. “A lot of times in market years like this one, actual prices
    tend to disappoint,” said Good, as cattle go to bigger weights and the backlash
    to higher grocery store prices is felt. He expects fed cattle prices to average
    $104-$105 per cwt this year, $10 higher than last year. Feeders (750 pounds)
    will be $120 per cwt, and calves (550) will average $140 per cwt, with highest
    prices between now and grass season. “These are conservative estimates,” he
    said. He expects feedlots to struggle to make any money this year, stockers
    will make a little, but cow/calf may be the most profitable ever.

“Everybody makes money this year, despite high costs,” he
said.

Blach summarized  by saying that over the next 2-4 years, fed cattle prices
will range from $94 to $120 per cwt. Calves will range all the way up to $175,
he predicted. “Equity returns to the cow/calf producer,” he said.

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