What is in this article?:
- Beef cow numbers fall as producers want out
- Beef producers want out
- A smaller beef herd reported in USDA's Jan. 1 Cattle inventory estimates has provided the cattle markets with even more bullish news. Beef cow numbers continue to fall as producers seem to want out of the business, said Purdue University Extension economist Chris Hurt.
Beef producers want out
"Beef producers seem to want to get out of the industry. What will change their attitudes? There are two key factors--a return to profitability and more abundant forage and feed supplies. Since the number of heifers being retained is so low, it will be late in 2011 or early 2012 before any movement toward expansion will occur," he said.
The economist said it is possible that corn and soybean meal supplies could increase with large 2011 crop production. Unfortunately, given the limited number of acres available, trend yields may do little to increase inventories, keeping the 2011/2012 marketing year prices high and volatile.
Increasing concerns about dry conditions throughout the southeastern states as well as the central and southern plains will keep producers from expanding until those conditions change. Those three regions account for 55 percent of the beef cows, he said. (See USDA/NOAA "Drought Monitor" at http://www.drought.unl.edu/dm/monitor.html).
How high will beef prices rise?
"Prices have already been record high and seem assured of making new highs throughout 2011. Live cattle futures prices on Jan. 31 are suggesting that finished cattle will average about $113 per hundredweight for the year with quarterly prices of $108, $116, $112, and $115, respectively. These prices are supported by recovering U.S. and world consumer incomes, small beef and pork supplies, and a rapid increase in pork exports," he said.
Oklahoma 600- to 650-pound calves sold last week at $132 per hundredweight, whereas 500- to 550-pound calves were at $146. The strength in calf prices over the past six months means that finished cattle prices have increased enough to cover the much higher corn and soybean meal costs to finish cattle. Unlike the rising feed prices of 2008, the surge in feed prices over the past six months has been met by increases in both live cattle and lean hog futures prices, he said.
"Weather in 2011 and 2012 will probably be the deciding factor determining when the beef cattle industry will shift from liquidation to expansion. Favorable weather that provides above-trend corn, soybean, and wheat crops, along with abundant forages, could shift the industry into expansion by 2012," he said.
Much lower feed prices would provide strong financial incentives to expand brood cow numbers. Trend yields should provide modestly lower feed prices, and calf prices will rise proportionally next fall, providing some financial incentives to expand brood cow numbers. However, below-trend yields and shortages of forages would keep the industry in a state of contraction with even higher finished cattle prices in 2012, he said.
"Much is riding on the weather in 2011 for both crop and livestock producers--and for everyone who enjoys multiple meals a day at moderate costs," Hurt said.