Beef Production and Prices Projected to Fall

 
Beef Production and Prices Projected to Fall

Live cattle prices hit a record high last year averaging $154 per. cwt., but prices look to soften up in 2015 at a projected $150 per. cwt.

During the Ag Leaders 2015 Livestock Outlook hosted by Allendale, Inc. the picture was painted for a market drop off in cattle along with a beef production slide.

"As we go past the apex of this market rally in livestock prices and now we are looking at some southward prices overall headed into 2017 and beyond," says Rich Nelson, chief strategist for Allendale.

Demand for calves was phenomenal last year with a 54% price increase. October sold steers weighing 525 lbs. averaged $2.90/lb. in 2014 compared to $1.88 the previous year. Nelson relates there was no way anyone could have projected that kind of price increase would have happened.

In typical situations those 5-weight calves would have ran between $215-$225 per cwt., rather than $290.

"In clear economic terms, this was ungodly what happened this past year with regarding this extreme price rally," Nelson adds. 

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Lower supplies of red meat due to fewer hogs and cattle led to price increases at the consumer level. Retail beef prices went up for both steak and ground beef by 20%. Ground beef had seen a 20% increase in 2014 as well.

Despite the price increase there was also a demand increase from consumers. A recovering economy left more income to be spent on beef and trends like high protein diets and the Paleo diet contributed.

It was really amazing that consumers accepted these prices. "Certainly, for a good chunk of last year they were demanding them and asking for more," Nelson says.

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Beef cow and heifer slaughter has dropped off sharply indicating expansion is happening. Currently heifer retention is at its highest rate since 1975 as a percentage of last year’s calf crop.  

"We are in expansion. It is happening," Nelson adds. However, the very first signs of expansion won’t be hitting packers until mid-2017.

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"We are still going to have a drop in beef production this year and maybe a slight drop next year," Nelson states.

Live cattle demand was up 13% in 2014. Nelson says this is the biggest single demand increase for live cattle in history. However, 2015 looks like a change in direction with a 10% decrease in live cattle demand.

Beef production is slated to drop 400 million lbs. after reaching 24.1 billion lbs. in 2014. This follows a continuing trend of falling beef production with 2013 bringing in 1.6 billion more pounds of beef than 2014.

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