2014 Feeder Profitability Questionable Despite Record-High Beef PricesThu, 09 Jan 2014 11:47:15 CST
As 2014 begins to unfold, Jim Robb of the Livestock Market Information Center says that we can expect cattle supplies to tighten up soon and that will affect the cattle price outlook across the sector.
“We were actually surprised by the amount of beef production that came to the marketplace in the fourth quarter of 2013. We’re going to see larger year-to-year declines throughout 2014 mostly because we’re going to see smaller steer and heifer slaughter, but also smaller cow slaughter than we had a year ago. So, those two will come together and we could easily see for the year fully a six-percent to seven-percent year-to-year decline in U.S. beef output in 2014. That’s a very large year-to-year decline.”
Robb says that such a decline could easily translate into a six- to seven-percent increase in fed cattle prices for the year.
“ We could easily have 2014 be the first time in history where fed cattle prices average over $130 per hundred weight. And that’s a mark, maybe, we didn’t expect to see just a few years ago.”
He says calf and yearling prices will also increase, especially if this year’s corn crop is normal. He says most of the increases in calf prices will probably come in the first half of the year.
Robb says that demand is always a fluid factor with domestic consumption and exports liable to change throughout the year.
When it comes to profitability within the industry, Robb says it will probably be a good year for the cow-calf producer, but the feedlot operator my find the going a little bit rougher.
“We learned in 2013 both on the feedlot side and the cow-calf side that record-high prices don’t always turn into profitability for the sector. I think it will be more of a struggle for profitability for the cattle feeders again in 2014 relative to the cow-calf operations because the margins are really under pressure with tighter cattle supplies and then this uncertainty about how high we can push wholesale beef prices and how much consumers will pay.”
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