Prepare for a Banner Year

December 7, 2013 09:45 AM
Greg Henderson cropped

Most of America’s ranchers are closing the books on a banner year. Stocker and feeder prices hit all-time price highs this fall at a time when prices normally see pressure from heavy supplies.

As good as the markets have been, next year could be even better. Can prices really improve next year? You bet, say most market analysts. That’s because cattle market fundamentals are shaping up to deliver even smaller supplies and high demand.

The primary factor driving a rosy 2014 cattle outlook is lower grain prices. It’s no coincidence that as corn prices declined to three-year-lows this fall, cattle prices experienced an unprecedented rally. Stocker and feeder cattle prices rose 25% to 30% since May, boosting the feeder cattle index price for 750-lb. steers to more than $165 per cwt.

Falling corn prices also provided a much-needed boost for feedlot operators. After two years of negative margins, cattle feeders began printing closeouts with black ink again in late October.

According to John Nalivka, president of Sterling Marketing Inc. in Vale, Ore., feedyards saw average profits of nearly $123 per head for cattle sold in the first week in November. That’s a dramatic turnaround from the $32 per head they lost on cattle last year. He adds average feed costs per head were $172 lower in November 2013 than November 2012.

Although some parts of cattle country remain locked in drought conditions, most cattle producers saw improved weather conditions during 2013. Rainfall totals closer to regional averages produced much needed hay and forage, further reducing production costs.

Cheaper costs of production always provide opportunities for profit, but shrinking supplies of feeder cattle will support demand. It’s nearly a certainty, analysts say, that the U.S beef cow herd will be smaller when USDA releases its annual inventory report next year. That will be the eighth consecutive year of cow herd decline—a guarantee that calf supplies will shrink.

Feedyards and stocker operators will aggressively seek cattle in all weight ranges next year, which will keep calf producers in the driver’s seat. With calf and yearling prices already high, analysts suggest that new records could be set again next year.

On top of the positive supply and demand outlook, the beef industry continues to enjoy the rewards of a robust export market. The U.S. Meat Export Federation (USMEF) says in the first eight months of 2013, beef exports were up 1% in volume and 10% in value—to 767,017 metric tons valued at $4.01 billion. USMEF says the export value per head of fed slaughter beef in August aver­aged $253.87, up $46.16 from last year. Demand for U.S. beef is expected to remain strong next year, as well.

With the fundamentals shaping up in your favor, 2014 is not the time to cut corners. Do everything you can to make your calf crop as healthy and attractive as possible. Here’s to a banner 2014!

greg henderson
Editorial Director, Beef Today, writes from Mission, Kan.

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