Cattle record near

Cattle record near

- Fundamentals provide solid support for fed prices. - Cow/calf producers set to rebuild herds "if and when" drought ends. - Chickens

THE cattle markets were basically unchanged last week through Thursday, trading at $128/cwt. early in the week in Texas and at $204.50/cwt., carcass basis, late in the week in Nebraska, a carcass price that was equivalent to a $128 cash cattle market.

Prices were 4-6% higher than at this time last year.

Cattle feeders are current, the U.S. and global economies are improving and packers are experiencing good demand for beef both at home and abroad -- all of which are providing support for high prices for finished cattle, according to Feedstuffs sources.

Indeed, prices will be record high, sources said.

Cattle supplies are becoming increasingly tight, and beef production last year was the lowest since 2005 and is estimated to decrease sharply this year, by 5% or more, according to Ron Plain at the University of Missouri. The per capita supply this year will be the lowest since 1952, and beef production is forecasted to decline again next year, he said.

Accordingly, cattle prices will be record high for the next two years, Plain said, but how high depends on the demand factor.

Cattle prices hit their highest price ever at $130 last March, but live cattle futures closed last Thursday at an average of $132.85 for this year and $136.00 or higher early next year. Record territory is just over the hill, sources said.

This record territory has not yet factored in what will happen if and when -- the "when" is all but a given -- Japan raises age restrictions on U.S. beef cattle, according to, two Iowa cattle producers who just returned from a trade mission to Japan and South Korea. Japan currently accepts beef from cattle under 21 months of age but could soon up that to cattle under 30 months of age.

Dean Black, a cattle feeder from Somers, Iowa, and Scott Heater, a seedstock producer from Wapello, Iowa, noted that they visited with a number of Japanese beef importers who said they are developing marketing plans to expand sales of U.S. beef.

Black and Heater added that those importers said they expect to increase their imports of U.S. chilled and frozen beef by as much as 40%.

They said the U.S. Meat Export Federation (USMEF) has projected that Japan's relaxed cattle age limitation will add $19 per head to fed prices. The decision is anticipated this spring.

Black, a member of the national Cattlemen's Beef Board, and Heater, a member of the Iowa Beef Council, represented the state beef council on the mission, which also included Iowa agriculture secretary Bill Northey and representatives of the Iowa Department of Economic Authority, Iowa Corn Growers Assn., Iowa Pork Producers Assn. and USMEF.

Record-high prices for feds will also mean strong prices for calves, and this really should prompt cow/calf producers to finally begin expanding the country's cow herd from its 50-year low, sources said.

The cattle inventory report will show that the cow herd on Jan. 1 was down 1.0-1.5% from its year-ago level, down from year ago for the eighth straight year, according to Darrell Mark at South Dakota State University.

However, he said there will be "much discussion" about cattle prices pointing to herd rebuilding, although for producers, this will be "a complex, multi-year decision" affected by the availability and condition of pasture and range, land values, rental rates, high and volatile input prices such as for hay, herd productivity, expected cattle prices and returns for this year and beyond and lifestyle choices.

There are a number of ways for producers to expand herds, Mark said, including retaining heifers from the 2013 calf crop, breeding retained heifers and buying bred stock so there are calves to be sold this year.

The cattle supply scenario suggests strong prices and profitability for producers for several years, Mark said, and probably the single do-or-don't factor will be if and when the 2012 drought ends.

"If" is becoming questionable, sources said.

Last year was the warmest year on record in the continental 48 states, the National Oceanic & Atmospheric Administration (NOAA) officially reported last week. (Records go back to 1895.)

NOAA reported that the average temperature last year was 55.3 degrees F -- 1.5 degrees higher than in 2011, 1.0 degree higher than the previous warmest year in 1998 and 3.2 degrees higher than the 20th century average, which made last year's average temperature particularly stark.

NOAA also reported that last year's weather was the second most extreme on record because of the drought that, at one point, covered 61% of the country.

The drought remains unbroken, sources said, and the western Corn Belt continues its struggle with a moisture shortfall; it needs 6-9 in. of moisture to return the drought index reading to normal.

At this time, that's "a tall order" and reason to worry about pasture and range conditions for herd rebuilding, as well as field conditions going into spring planting, Steve Meyer and Len Steiner warned in an edition of their "Daily Livestock Report" last week.

Brazil is starting to talk tough about the bans certain countries have imposed on beef from Brazil and is threatening possible retaliation through the World Trade Organization in March if the bans aren't lifted.

Ten countries have now banned or partially banned beef imports from Brazil following the country's disclosure of a cow with bovine spongiform encephalopathy (BSE) last month, although the cow had been put down in 2010 (Feedstuffs, Dec. 10 and Dec. 17, 2012).

Government officials emphasized that the cow had atypical BSE, that Brazil's BSE status with the World Organization for Animal Health (OIE) is still "negligible" risk and that the delay in analyzing the cow's tissue and announcing the findings was due to "logistical problems" at the laboratory.

Nevertheless, Egypt has banned beef from the Parana region where the cow was from, and Saudi Arabia has banned all beef from Brazil. Egypt and Saudi Arabia are among Brazil's 10 largest beef customers.

Other countries that have banned Brazil's beef include neighboring Peru, as well as China, Taiwan, Japan, South Korea, Jordan, Lebanon and South Africa, which are all minor trade partners. The Chilean Federation of Beef Producers has asked the agriculture ministry to implement a ban.

Russia, another major beef export market for Brazil, has not yet taken a position, but a veterinary official said he sees no reason "to impose countrywide restrictions."

The impact on Brazilian cattle prices is readily apparent as prices fell $4/cwt. in the week following the announcement.

The head of OIE also is starting to talk tough, saying last week that bans on Brazilian beef aren't justified and urging countries to lift their bans.

"One case in a population of 200 million head of cattle does not justify" the restrictions, OIE director general Bernard Vallat said.


Market roundup

Elsewhere in the livestock and poultry sectors last week, the hog markets were up $1.03-2.12 to $81.72-83.64/cwt. on a lean carcass basis across the Corn Belt last Thursday, prices equivalent to a $62-63 live cash hog market and 2.3% higher than year ago.

Hog producers were current, and packers were in the market for hogs for pork export orders, sources said.

However, futures seemed unsure about their direction, trading down most of last week and closing on Thursday at levels that were reducing the length and strength of projected profitability this summer.

The chicken markets were mixed last week as chicken production, after two holiday-shortened weeks, was returning to normal, and supplies were more available, sources said.

Chickens were unchanged in the eastern markets at $1.01-1.05/lb. last Thursday and were down 4-7 cents in the Midwest at 93 cents to $1.00/lb., prices that were almost one-third higher than year ago.

Breast meat was unchanged to down 4 cents at $1.26-1.32/lb., 3.6% more than year ago, and full wings were $1.96-2.03/lb., 10.8% more than year ago. Sources said wings were "firm and climbing" on demand related to the football playoffs.

The egg markets were steady and unchanged at $1.15-1.19 and $1.08-1.10/doz. for large-sized eggs delivered to eastern and midwestern store doors last Thursday, 0.8% lower than year ago.

Sources noted that the country's flock has grown significantly, and "a lot of birds are laying a lot of eggs." However, sources also said producers have moved aggressively to cull and molt birds to better control production.

The turkey markets were unchanged to down 3 cents last week at 93-99 cents/lb. for hens and retail-sized toms last Thursday, 2.5% lower than year ago. Sources said activity was limited as buyers have not yet started to work on their contracts.

Fresh tom breast meat was $2.00/lb., 17.7% under year ago.

In the dairy markets, butter decreased 4.75 cents last week to $1.4475/lb. on Thursday, 9.8% less than year ago; barrel and block cheeses decreased 4.5 cents and 4.0 cents to $1.6850/lb. and $1.72/lb., 6.3% and 6.8% more than year ago.

Sources said they expect recent increases in milk production to slow, given record-high prices for corn, soybeans and hay that will retrace returns over feed costs in the first half to about the mid-$5 range. This portends less milk in the coming months, sources said.

Volume:85 Issue:02

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