Agricultural News
Tight Cattle Supplies Have Become the Dominant Market Force as 2014 is Ushered In
Tue, 31 Dec 2013 15:20:19 CST
Cattle prices were record high in 2013 with tight supplies finally becoming the dominant market force instead of drought and surging feedstuff costs taking center stage. Calendar year 2014 is forecasted to bring more record highs. But the lesson of the last two years is that high prices don't always mean profits. Feedlot closeouts gushed red ink until the last few months of 2013. Many cow-calf operations recorded their highest costs ever due to huge winter feeding bills.
The USDA-AMS 5-market average steer price was above $120.00 per cwt. each quarter of 2013 and annually eclipsed the prior record high set in 2012 by over $3.00 per cwt. Calf and yearling prices were generally on a downward trajectory in the first half of 2013, but as soon as improved corn crop prospects and forage conditions came onto the scene the market direction changed dramatically. In the fourth quarter, yearling and calf prices were higher than any time in history. Instead of the normal softening of calf prices during the fourth quarter of the year, prices took off. In the Southern Plains, 500-to 700-pound steer calves averaged over $187.00 per cwt. in the fourth quarter, 16% above 2013's. Yearling steers (700- to 800-pound) averaged over $167.00 per cwt. in the final three months of 2013, 14% above a year earlier.
U.S. beef production in 2014 is expected to by decline dramatically, posting an annual drop of 6% to 7%, falling to its lowest level since 1993. If beef demand is rather stable in 2014 (both domestic and foreign), both beef and fed cattle prices have room to continue higher. Current forecasts put 5-market average slaughter steer prices for 2014 5% to 7% above 2013's and should average over $130.00 per cwt. for the first time. After the price run-up in late 2013, resistance to further calf and yearling price increases will come from returns for those feeding cattle. At least into early 2014, all the profit potential of feeding cattle has been bid into feeder animal prices. Further strength in the fed cattle market and lower feedstuff costs will be required to significantly bid-up feeder cattle prices. Year-on-year gains in calf and yearling prices will likely be the smallest in late 2014. In next year's fourth quarter, another good crop growing year in the Midwest could put calf and yearling prices 1% to 5% above 2013's.
Source: Livestock Market Information Center, Denver, Co.
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