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Cattle Producers Anticipate Price Peak

January 7, 2013
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Cattle producers anticipate 10-year cycle high, but the odds hinge on Mother Nature’s cooperation

This year cattle prices should reach the peak of the historical 10-year cycle. Normally, this would be cause for celebration, but there are still some hurdles to jump, especially for feeders.

"The 10-year cycle price high is due in the year ahead, which corresponds with a cycle low in the breeding herd and beef production," says Pro Farmer editor Chip Flory. "But the weather is clearly set to throw the cycle into question, and the cattle market for 2013 is as much a weather market as the corn market was in 2012.

"If we get the pastures back in the Plains, we should see some cow–calf producers save back heifers to rebuild the cowherd. That removes some females from the slaughter mix and drives  beef production down, which results in one final spike to the upside in prices."

Until forage conditions improve, the question of herd rebuilding is a moot one, says Oklahoma State University livestock economist Derrell Peel. He expects that the next USDA cattle inventory report, released later this month, could see another 400,000- to 500,000-head decrease in the beef cowherd, spread across several states.

"I suspect this represents extra heavy culling of the cowherd and fewer heifers entering herds  rather than the deep herd culling or herd dispersals that occurred in 2011," Peel says. "Nevertheless, this is herd capacity that can return rather quickly with improved forage conditions."

With a limited number of replacements, producers can expect female breeding stock prices to climb. The good news for cow–calf producers is that calf prices are expected to reach record levels as well.

"We’ve seen record bred heifer prices at Show-Me-Select sales in Missouri this year and at seedstock production sales all fall," says Ben Eggers, Angus breeder and manager of Sydenstricker Genetics in Mexico, Mo.

"Bull prices have been stronger in areas that had a bit more rain, but in general, bull prices are up. Cow–calf producers have optimism—at these prices, a bull that will increase your pounds of marketable product is truly worth more," he says.

"The awareness of trichomoniasis has also been a boost to the value of seedstock breeding bulls," Eggers adds. "Producers need reputable bulls in good reproductive health to protect their investments in the herd."

While bulls were in demand at Sydenstricker Genetics’ record-setting fall sale, female prices, especially for bred heifers and donor-type females, were also up significantly. "Embryo transfer hasn’t increased in price compared with other inputs, yet the technology and outcomes have only gotten better since it was developed," Eggers says. "We’ve seen that producers will take the opportunity, when they have extra cash flow, to invest in better genetics to help push their herd forward."

In terms of fed cattle price, two years ago analysts were talking about a 2013 high around $125, but that estimate was bumped to $135 after the $125 level was hit in 2012. "Now, we can’t rule out a fat cattle bid touching $145 in 2013—if the weather cooperates and we get the pastures back," Flory says. "If we don’t get the pastures back, the cycle high will be pushed back to 2014 or whenever it finally decides to rain."

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FEATURED IN: Farm Journal - January 2013

 

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