WEST LAFAYETTE, Ind. — Expectations of tight beef cattle
supplies and strong demand are pushing cattle prices higher this fall — a trend
that could continue for the foreseeable future, Purdue Extension agricultural
economist Chris Hurt said.
Finished cattle prices hit their summer lows in early August
at slightly below $120 per hundredweight, but have climbed back toward $130 in
anticipation of small beef supplies in the coming year.
According to Hurt, per capita beef supplies, or the amount
of beef available per person in the U.S., likely will be down by about 5 percent
for the rest of this year and on into next.
High cattle prices combined with low feed prices — corn hit
$4.32 per bushel on Oct. 14 — likely means the small number of available calves
could be placed on feedlots at lighter weights than a year ago when feed prices
“Lower priced feed and the expectations for increasing
finished cattle prices over the next four to five months should also encourage
feedlot managers to feed to heavier weights,” Hurt said.
Low cattle numbers mean feedlots and packing facilities have
a lot of unused capacity. Capacity is a fixed cost that doesn’t go away with
limited cattle supplies.
“The combination of excess capacity and high fixed costs
means that both will tend to bid strongly for the limited cattle numbers,” Hurt
said. “Ultimately, this strong bidding gets back to the brood cow producer in
the form of record-high calf and feeder cattle prices.
“Unfortunately, these conditions also mean that the margins
for both packers and feedlots, while better than in the past year, will still be
narrow and likely less than their total costs.”
Strong cattle prices and aggressive bidding by feedlots and
packers are likely to lead to a year or more of additional downsizing.
Some cattle producers in areas with healthy pastures could
start retaining heifers as early as this fall. But in dry regions, which
represent about 45 percent of the brood-cow herd, expansion won’t begin until
weather becomes more favorable and pastures recover.
“If beef cow numbers begin to slowly turn upward in 2014,
downsizing of cattle feeding capacity might end in 2015 and the packing industry
by 2016,” Hurt said. “The years beyond 2016 should provide some expansion for
the beef cattle industry, but still a slow upward growth.
“A slow upward trend is not highly optimistic, but much
better than declining trends of recent years.”