With stable domestic demand and steady export volume predicted for 2012, there are reasons to be bullish on fed cattle prices. Iowa State Extension livestock marketing specialist, Shane Ellis, talked about factors that come into play on beef prices in the coming year at a Cornhusker Economics Conference session held recently in Columbus.
"There are fantastic fed cattle prices out there, and we're going to need them because our input costs are growing more and more," Ellis said. Profitability will continue to be affected by high feed prices, he said.
This year will see another dip in beef production, thanks to an ever-shrinking cowherd, caused in part by severe drought across the Southern plains states. "Demand in 2012 is projected to be the worst since 1991on a per capita basis," he said. "But the population keeps growing, exports are picking up and we're not producing as much."
He said that the U.S. had an accelerated decline in cattle numbers last year. "We got rid of an awful lot of cattle in a hurry," Ellis said. "Beef cows are the industry's engine." With profitability at an all-time high for cow-calf producers, he believes that cowherd numbers will grow again, with an expansion beginning around 2014. But this depends largely on whether the drought continues in the South.
"It's more and more difficult to get into the industry," Ellis said. "It takes time and you need to stay at it." Many analysts wonder if U.S. producers can maintain high beef exports with less beef. Ellis thinks that they can. He said that foreign countries particularly like high-end loin cuts.
He also had words of caution for producers. "A decline in economic conditions can let the steam out" of the entire beef market," said Ellis. While general economic conditions are improving, a second dip recession would lower prices dramatically.
With strong beef exports to Japan, Mexico, South Korea, and even Canada, and a lower cowherd in the short term, Ellis said that the future for beef markets looks bright. But problems in the economy could loom over an otherwise bullish beef outlook.
For more information, you can email Ellis at [email protected].