Beef Magazine is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Calf Prices Could Increase, But…

Calf Prices Could Increase, But…
Calf prices have a chance for a contra seasonal rally, but Mom Nature and the evolving industry infrastructure will decide.

“Can the market attain new levels next spring or is it consolidating into an established trading range?,” wonders Nevil Speer, University of Western Kentucky, in his monthly Market Profile that you can find here.

That’s the key question many are pondering amid tight cattle supplies, anticipated declines in beef production and consumer reluctance to pay more for beef.

“For now, it appears the market faces some headwinds to find a new leg up,” Speer says. “Primarily, there’s work ahead given the slowdown in marketings in recent months coupled with surging carcass weights. At the very least, the market needs to do some sorting in the near-term and will likely be choppy in coming weeks.”    

Meanwhile, Tim Petry, North Dakota State University livestock economist, says in this week’s In the Cattle Markets, “…Even though a contra seasonal increase in calf prices of the magnitude of last year is not likely, the calf market should receive support from several factors.”

For one, Petry explains, “Feeder cattle supplies outside feedlots on July 1 were down about 3.2% from last year. And calves have been marketed early from areas hard hit by drought conditions…” He also notes recent rains in parts of the Southern Plains have improved prospects for winter wheat grazing. Petry adds that more corn silage is available in the western Corn Belt, too, because of the drought.

“Even though calf prices are lower now than earlier expected, the potential for higher calf prices next year exists. A smaller calf crop in 2013 is likely and will be supportive to prices,” Petry says. “However, Mother Nature will need to cooperate with much-needed precipitation across the U.S. Spring seasonal highs in calf prices are dependent on spring grazing conditions. And a good corn crop will be necessary to keep corn prices from increasing.”

That’s before considering a potential retooling of the industry’s infrastructure.

Speer explains that, during the late 1990s, feeder cattle inventory outside of feedlots represented more than three times active bunk capacity in the U.S. – “enough to stock feedyards for the year and maintain a buffer for retention of replacement heifers.” But he adds that bunk capacity "has since increased while the cowherd is contracting. The outcome being that supply in 2012 is less than 2.5 times capacity. That’s barely enough to provide normal turns of cattle, let alone extended grazing and/or heifer retention. 

“Some companies will survive (and even thrive) in the hyper-competitive pursuit to source cattle, while others will fall even further behind. Therefore, rationalization is seemingly inevitable. Those same dynamics play out in the packing sector, too – margins remain very challenging with no real hope of improvement given over-capacity.” 

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.