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Cattlefax: Good News For Beef Market

1. Prices

Prices have been in record territory this year, with fed cattle topping out at $1.50 a pound live. That’s near $2,000 for a finished steer. Weaned calves have been over $2 a pound at auction markets, and that’s over $1,000 a head.

In the coming year, Kevin Good of CattleFax expects finished cattle to range from $1.25 a pound to $1.45, with the average in the middle. 

“Feeders (750 pounds) will average $1.68, and weaned calves will average $1.93,” he predicts. 

Cull cows will be significantly higher, too. They’ll average 90¢ a pound if sold for slaughter. The demand for young bred cows is very strong now, says Good. They will average $1,700 to $1,750 per head in the coming year, up from $1,400 last year.

2. Profits

CattleFax CEO Randy Blach says profits to cow-calf producers will be near astronomical levels for the next two years at $350 to $400 per head. They’re the biggest winners in this market, he notes, and he’s hopeful they’ll take the signal to expand cowherds. 

“Expansion will get under way earnestly this year,” says Blach. “We must expand, or we are going to become a niche market.”

Beef cow inventory on January 1, 2014, at 29 million head, was the lowest since 1941. Blach wants to get back to 32 million head over the next few years. He believes this will still allow room for profitability in all segments.

3. Costs 

Feedlot operators have had the double whammy: high prices for replacement feeder calves and high feed costs. 

Until this year. 

The average cost to finish a steer through a feedlot declined by $217 a head in the last year due to the lower cost of corn and hay. 

At the same time, the cost of a replacement feeder calf went up by $213 a head. 

“Never underestimate the efficiency of these markets,” says Blach.

4. Consumption

 Think you’re eating less beef these days? You are – 30 to 35 pounds less than in the 1970s, on average. 

Beef consumption has declined about 1 pound per person per year over the last 35 years. It was over 90 pounds then; it’s less than 60 pounds now.

5. El Niño 

This is the warming trend in the Pacific Ocean. All models show it, says Art Douglas, the CattleFax meteorologist from Creighton University. He thinks it means near ideal growing conditions in the Midwest for the next two summers – cool and moist. 

If he’s right, Mike Murphy of CattleFax says you could see an above-trend corn yield over 160 bushels an acre. That would give a 13.7 billion-bushel corn crop next fall, possibly 14 billion. That’s despite the fact that he thinks 2 million acres will shift from corn to soybeans. 

If the big corn crop materializes, prices for corn in the coming marketing year will average between $3.60 and $4.10 a bushel, Murphy notes.

“The corn market will help cattle feeders in the coming year,” he says. Hay is cheaper, too, and that should benefit cow-calf operators.

6. Customers 

There were 78 million new customers this year. That’s the equivalent of New York City’s population times nine, per year. Worldwide population growth puts that many new mouths on the planet every year.

7. China 

They are closed to U.S. beef because of some of the feed additives, but there’s a chance that could change soon. It will be a big deal for U.S. cattle producers, says CattleFax’s Brett Stuart.

At the Cattle Industry Convention this past February, CattleFax market outlook specialists shared their short- and long-range beef industry outlook for profits and market growth. Below are some of the highlights.

China now buys 1 billion pounds of beef per year from the Australians, but the rising Chinese middle class really wants more of U.S. choice fed beef. There are 300 million Chinese in that class now, and that could grow to 640 million by 2020, says Stuart, with staggering market potential. As China demands more cars and cell phones, it also wants more quality beef.

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