MCHENRY, Ill. — Improving pasture conditions and strong
cattle feeder prices are providing opportunities for cattlemen to begin
rebuilding the U.S. cowherd.
“There is light expansion going on with the nation’s
cowherd,” said Rich Nelson, chief strategist with Allendale Inc. in McHenry.
“Nine of the top 12 beef cow states have seen moisture return, so there is an
incentive to expand based on moisture and calf prices.”
This expansion also is indicated by the lower number of
“The beef cow numbers have been down double digits for
several months compared to last year,” Nelson said.
“It appears to me that in late 2013, we are beginning the
process of herd rebuilding,” agreed Derrell Peel, livestock marketing specialist
at Oklahoma State University. “That is based on indications rather than
confirming data, but I think it’s happening.”
When the cattle inventory report is released by the U.S.
Department of Agriculture in January 2014, Nelson said, the heifer retention
will likely increase 1 percent over the 2013 number and possibly include a 2
“We will see some expansion in the next cattle inventory
report,” he added.
“Forage conditions are significantly better in a number of
places,” Peel reported. “Although, there are some areas that still have fairly
severe drought and quite a lot of areas that still have marginal to moderate
And, Peel said, hay production in 2013 increased
significantly and recovered from the low levels that were produced the previous
“We’ve been ready to expand for the last three years, but
the drought has postponed it and forced additional liquidation that was contrary
to what the market incentives were,” he said. “There is no doubt the feeder
cattle market is providing incentives to expand, but the question as we go into
next spring is if Mother Nature will cooperate and let us follow
As cattlemen retain heifers for their herds, this will
further tighten an already-smaller supply of available feeder cattle.
“We finished weaning calves one to three months ago
depending on the region of the country, so these guys have made their fall sales
and their decisions on heifers,” Nelson said. “I expect a 2 to 3 percent
reduction in available feeder calves.”
Typically by the end of the year, there is a decline of
feeder prices from the fall highs toward the spring low in prices.
“For the feeder cattle index, which is a measure of the cash
feeder prices in sale barns, we just posted a new high on Dec. 16 at $168.32, up
from the high in November of $165.50,” Nelson said.
“It will continue to be a challenging year for the feedlot
and packing sectors in 2014,” Peel predicted. “Those sectors have had many years
of excess capacity, and they have increasingly struggled over the last couple of
The large corn crop produced in 2013 is a positive aspect
for the feedlot operators.
“Feed prices will be somewhat more friendly in the next 12
months, but the relief cattle feeders will get from lower feed prices will be
offset by higher feeder cattle prices and limited feeder numbers,” Peel said.
“This will be a challenging year since feedlots will have difficulty in
maintaining numbers, and they have already paid record high prices for feeder
cattle this fall.”
On a live weight basis, the specialist said, average cash
fed prices will range from $131 to $134 for the year.
“It is possible we may see seasonal peaks of $135 and
perhaps as high as $140 in the late February to mid-April time frame,” he
“We have a unique situation in front of us for the next
three months because we had some very low placements, so we’re going to have
some very tight slaughter numbers in February and March — as much as an 8
percent decline in slaughter,” Nelson noted. “So we’re calling for $140 February
cattle, which is much more than the market is pricing now.”
He then expects a normal seasonal decline in cash cattle
prices in the summer to $125 and then a rebound at the end of the year to $134.
“If the cattle market hits $140, that would be a new
record,” the strategist noted. “But it will only be for a short time.”
“But a lot of feedlots will face breakevens that are higher
than that based on the prices they paid this fall for feeder cattle and
particularly if they’re struggling with volume in order to run their feedlots
efficiently from a volume standpoint,” Peel said. “Even $140 fed cattle price
probably isn’t enough to ensure profitability for feedlots.”
Beef exports were strong in 2013.
“I’m very surprised by how well we’ve done this year,”
Nelson said. “We’ve had lower beef production and yet a 4 percent increase
Exports of U.S. beef are up in Japan, Mexico and the Asian
countries, the strategist said.
“The drought in Mexico the last 1.5 years has decimated
their cattle herd, so they need beef now,” he said.
“While there are problems in mainland China due to trade
disputes, exports of beef to Hong Kong are up 129 percent compared to last
year,” he added.