October 25, 2010

US cattle sector set to break price records

The US cattle industry is ready to set records for high prices this year and next as higher feed costs stall herd expansion and push increased beef supplies out to 2014, according to Purdue University Extension Economist Chris Hurt.

In an outlook report, Hurt said the most recent surge in feed prices will likely keep producers from expanding until feed prices moderate, which would not be until the 2011 US crops are assured, 10 months from now. That means cow numbers will not likely expand until 2012 and beef supplies won't start to grow until 2014.

Meanwhile, USDA predicts an 18% increase in beef exports and 5% decrease in imports this year. Hurt said that will result in a 500-million-pound decrease in beef available in the US compared to last year, which will push finished cattle prices up by US$2-3 per hundredweight.

Smaller supplies of competitive meats will also support beef prices. Hurt predicted the average Nebraska finished steer price for 2010 will reach a new record of US$94.80. He further predicted that record will be broken next year with Nebraska finished steers averaging in the low US$100's.

Hurt expects prices in the low US$100 during the first quarter of 2011, reaching yearly highs around US$105 in the second quarter, and then dropping by US$2-4 per hundredweight in the third quarter, finishing the fourth quarter in the very low US$100s.

As for meat prices, Hurt said consumers are in for many years of much higher retail beef costs. Retail beef prices so far this year have averaged US$4.37 per pound, exceeding the previous record of US$4.29 for the same period in 2008.

Early forecasts of retail beef prices in 2011 are US$4.60-4.65 per pound, an increase of about 6% over the 2010 record price and compared to an average retail beef price of US$3.84 per pound for the five years from 2002 to 2006.