We’re one month into 2012 but it’s not too late for me to share my wish list for the U.S. beef industry for this year. Topping my list, as you might expect, is my hope that Americans continue to support beef as much as they did last year. For we all know that demand, not supply, will determine how high beef and cattle prices go this year.
My other wishes for 2012, in no particular order, include:
- Texas and other drought-stricken states receive soaking, but not flooding, rains for the next several months.
- The U.S. produces a record-large corn crop after two disappointing years.
- Restrictions on U.S. beef in Asian markets disappear.
- The federal government works with Congress over amending the country-of-origin-labeling (COOL) law.
- Industry groups work to promote the vital role that agriculture plays in the U.S. economy and feeding people around the world.
The past year was one of records. It saw record-high fed cattle prices in the spring and December, and record feeder cattle and calf prices throughout the year. It saw record-high boxed beef prices (apart from a one-week aberration in October 2003). It saw record-high retail beef prices. And, it saw record-high values for U.S. beef exports. So, can 2012 see a repeat performance?
The answer is “yes” but with caveats, all relating to how much more consumers at home and abroad are prepared to pay for beef. The shrinking U.S. cattle herd means the fed cattle supply will be 1.5% smaller this year and fed cattle will continue to sell at new record high prices.
Retail beef prices set new record highs early in 2011 and put in all-time highs last fall. The All Beef price was $4.50/lb. in October and November while the Choice price averaged $5 in November. As high as these were, they only reflected $115/cwt. fed cattle prices. So retailers will have to keep raising their prices this year.
The key question is how consumers will respond. USDA forecasts that per-capita beef supplies will decline by 3.3 lbs. this year to 54.1 lbs., the smallest number in 60+ years. I hope consumers will keep paying higher prices for beef because they won’t be consuming so much. In particular, I hope they keep paying more for a great steak rather than spending more on ground beef.
The pictures last year of parched pastures in Texas and other states were heartrending. So, I hope for the sake of ranchers in the region that rain truly breaks the drought and starts the road to recovery. The overall industry also needs this to occur if the national herd is going to start expanding to take advantage of the growing global demand for beef.
As I write this, corn futures prices are hovering around $6.50 to $6.70/bu. This reflects tight domestic and global supplies. So, it will be a relief, especially to cattle feeders, if the 2012-2013 crop returns to producing trend-line yields. Such yields would be about 163.5 bu./acre. These would produce a 14-billion-bu. crop that would be 15% larger than the 2011-2012 crop. This, in turn, according to Informa Economics analysts, would push the average price down to $4.50/bu. from $6.10/bu in 2011-2012.
I began writing about COOL in the 1990s. It’s startling that one issue could consume so many years of industry energy and create unnecessary divisiveness among producers. So, I hope this issue is finally laid to rest this year. It might, though, take the Obama administration working with Congress to amend the COOL law to bring the U.S. into compliance with a WTO ruling against it last November. Maybe that’s too much to wish for.