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,”
- 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.