Beef cattle prices look strong into 2012
The southern Plains drought of the last year continues to shrink the beef cattle herd in that region as feed costs and other profit factors keep cattle producers discouraged from expanding their stock.
Beef cow numbers have declined 12% and replacement heifers have fallen 5% in the last 4 years despite continued strong slaughter numbers during that time, according to Purdue University Extension livestock economist Chris Hurt. Now, add in increased exports -- up 19% in 2011 so far alone -- and Hurt says the beef market's recovery has started to come back to bite some producers.
"A weak dollar and strong economic growth in developing countries stimulates demand," he says. "Beef exports are expected to be a record 11 percent of total U.S. production next year. This is a sharp recovery from 2004 when exports represented just 2% of production after discovery of a BSE cow caused many world buyers to drop U.S. beef. Imports also are down 5% this year, meaning the U.S. will be a net exporter of beef -- an unusual situation."
That means tighter domestic beef supplies as well, and all these market factors will likely mean higher beef prices through the next year, meaning a strong marketplace for cow-calf producers, for example. Calf prices, he says, will likely stay high for at least the next 3 years.
"The breeding herd is not likely to begin expansion until the drought in the Southern Plains fades," Hurt says. "If crop yields return to normal in 2012, prices for major feedstuffs and forages will be lower, and finished cattle prices will be very high. This is a combination that can add quickly to calf prices by the fall of 2012. The start of heifer retention in late 2012 would reduce beef supplies even more and be the foundation for even higher cattle prices in 2013.
"All of this favors Midwestern cow-calf operations that have reasonable forage supplies this year and can hold cows for the longer-run opportunities," Hurt adds.