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AFBF: High prices for calves, fed cattle will continue through 2015

 

 

By DOUG SCHMITZ

Iowa Correspondent

 

WASHINGTON, D.C. — Despite going into 2014 with historically small cattle numbers and exiting last year with the lowest annual beef production figure since 1993, high prices for calves and fed cattle are expected to continue through 2015.

That’s according to John Anderson, deputy chief economist for the American Farm Bureau Federation, who described 2014 as "a year, in many respects, of dramatic extremes.

"On a per capita basis, domestic disappearance for 2014 is estimated to work out to 54.2 pounds per capita (retail weight)," he said. "This will be the lowest per capita beef consumption since the early 1950s."

Anderson explained tight supplies of cattle, beef and competing meats contributed to unprecedented prices at every level of the market; whether retail beef, wholesale beef, fed cattle, feeder cattle, stocker cattle or cull cattle, "every part of the industry witnessed record prices in 2014.

"Consider retail prices: the average All Fresh beef retail price for November 2014 was 597.5 cents per pound. This price was almost 20 percent higher than the prior November, and it marked the sixth consecutive month in which a new record price had been reached."

But when December data are available in the USDA’s Jan. 30 Cattle report, Anderson said that streak of record-setting prices may well be extended. "Fed cattle prices also reached record-shattering levels in 2014. The highest weekly five-area weighted average price was posted in the last week of November. At $171.38 (live basis), that price was over 25 percent higher than the prior year’s highest price.

"Impressive as beef and fed cattle markets were in 2014, their performances kind of pale in comparison to that of cash calf markets," he added. "Calf prices in 2014 were absolutely phenomenal."

For example, the high price for the year on 700- to 800-pound feeder steers at Oklahoma City was a bit over $248 per cwt. The 2014 high on 400- to 500-pound steers was $348, more than 50 percent higher than 2013’s best price on that class, Anderson said.

Derrell Peel, Oklahoma State University livestock marketing specialist in Stillwater, said in 2014 cattle and beef prices advanced from what were then record levels at the beginning of the year to a nearly-continuous series of record levels throughout the year. He said cattle and beef prices are expected to maintain these levels in 2015, "not increasing as much or as fast as in 2014, but averaging higher than 2014, and are likely to set new record prices seasonally during the year.

"For the most part, the same factors we have been watching in 2014 will determine how much higher cattle and beef prices will push in 2015," he said. "The beef cow herd almost surely began expanding in 2014, though final confirmation will come in the annual cattle report due out Jan. 30.

"The question is more one of how much herd rebuilding happened in 2014. An increase of one-half to 1 percent in the beef cow herd is expected. Herd expansion is expected to continue in 2015 and for several more years, but it is by no means guaranteed."

That’s because severe drought conditions persist in the far West and marginal to severe drought areas remain in the Southern Plains and Southwest. "These areas have the most potential for herd expansion, having been most depleted during the drought and continued drought or slow recovery in these areas will limit herd expansion in 2015," Peel said.

Moreover, in 2014, total beef exports so far are close to year-earlier levels, including lower exports to Canada; slightly lower to Japan, but up sharply to Mexico, South Korea and Hong Kong, Peel said.

"Continued strength in the U.S. dollar exaggerates the trade impacts due to exchange rates, making U.S. beef exports more expensive and beef imports cheaper, thus tending to decrease beef exports and increasing beef imports."

Overall, Anderson said with more meat in the pipeline and a tougher export market to deal with, it will be tough to replicate 2014’s cattle market – especially the fourth-quarter market, "which was clearly one for the ages. Demand has been very good, and we can hope – even expect – that it will remain so."

1/28/2015