By Kim Watson-Potts
Tight beef and pork supplies have translated to stronger meat prices, but this year, it looks like an especially good year for beef and cattle prices.
"Suddenly, owning cattle looks like a stroke of genius," says Chris Hurt, Purdue University Extension economist in his weekly report. "In a few short months, cattle prices have staged a seemingly miraculous comeback.
"In December, finished cattle were $80 per hundredweight, now they are $100. Calves were $1.05 a pound, now they are over $1.30. The reasons are clear: the world economy continues to recover, feed prices are lower, red meat supplies are down, exports are strong, and retail beef prices have been low."
The question is, will it last.
"Demand looks to be strong and expectations are for it to remain strong throughout the summer, says Justin Gleghorn, a risk management consultant with Brock Thompson Trading in Amarillo, Texas."Given we are short on cattle numbers, price looks to hold together rather well going through the summer months."
He expects a pullback in price, but again as demand holds together the market should not experience any substantial break,unless caused by an outside factor.
"I think prices should not break $88/cwt this summer," says Gleghorn. "Packers are paying up for cattle, but this is a unique situation where they are having to pay up for cattle, but their margins are largely positive. The drop value is strong and they are taking advantage of the number of cattle that were forward contracted earlier this spring at a price less than the current market price."
Hurt also sees finished cattle prices staying near $93/cwt this summer. "More cattle will move into feedlots given the strong prospects for finished cattle prices and moderate feed prices. If the 2010 crops develop normally, calf prices should be 20% to 25% above last year's levels. Steer calves averaged about $1.05 a pound in the eastern Corn Belt in the fall of 2009. This means they could average $1.25 to $1.35 this fall. While these are the strongest prices since the fall of 2005, they still may not be high enough to encourage cow-calf producers to expand given the much higher costs of production today."
Pork is also in good shape, with their liquidation last year their supply numbers are tight. Wholesale pork prices were up 25% this month.
Chris Hurt's weekly market outlook.