But without strong demand, lower prices would likely rule.

Larry Stalcup

October 18, 2018

4 Min Read
Little change expected in cattle prices; thanks, beef demand!

Will $169 to $174 per cwt. work for your calves next year?

That’s the projected price from Glynn Tonsor, Kansas State University Extension economist. He sees little change in calf, feeder and fed cattle prices next year. And he sees strong domestic and export demand among reasons why prices have actually seen some improvement, even with higher feed and labor costs and still high cattle numbers.

Speaking at last week’s K-State ag lenders conference in Garden City, Kan., Tonsor had these projections for 2019 prices on the Southern Plains, using late September data from the Livestock Marketing Information Center:

• 500- to 600-pound steers - first quarter, $168 to $173 per cwt; second quarter, $172 to $178; third quarter, $169 to $174; fourth quarter, $166 to $173. The annual price should average $169 to $174.

• 700- to 800-pound steers – first quarter, $147 to $151; second quarter, $148 to $153; third quarter, $145 to $151; fourth quarter, $145 to $154, with an average annual price of $147 to $151.

• Fed cattle steers – first quarter, $119 to $122; second quarter, $116 to $120; third quarter, $108 to $113; fourth quarter, $113 to $119, with an annual average of $114 to $118.

Tonsor projects 2020 steer calf prices to average $173 to $181. He sees 700- to 800-pound steers averaging $149 to $155 per cwt. Fed steers are forecast to average $117 to $121 in 2020.

Related:U.S. beef exports surge to record levels

Those prices are similar to 2018, when 3% more pounds of beef were marketed than in 2017. Tonsor sees that number dropping to 2% more in 2019 and less than 1% in 2020. “I think the supply growth period is about completed,” he said. “I believe we will see a small reduction in cow numbers for 2019.”

Demand matters

“Supply is only half of the story,” Tonsor said. “The good news is that beef demand, both foreign and domestic, has been stronger than we thought. The additional pounds that hit the market have been absorbed.

“Quite bluntly, prices for 2018 have been better than we anticipated because of that demand. Yes, we don't have 2014 prices again, but those prices (2018), given the volume of beef, are higher than we expected.”

As an example, second quarter feeder cattle prices were up nearly 0.5% from 2017, even though there were 2% more pounds of beef on the market. “That means demand grew (by about 2%). Anytime you see supplies and demand up, that is clean evidence that demand grew,” Tonsor said.

Better wheat pasture, thanks to good moisture after a dry spring and early summer, is helping increase the demand for feeder cattle. That means markets should at least remain steady for calves, despite higher calf numbers.

But higher labor costs and higher feed bills have caused the average annual cost per cow (total cash cost plus pasture rent) to increase from about $806 in 2017 to about $877 in 2018. Tonsor said the estimated average cow-calf return is near breakeven for 2018 but should increase slightly for 2019.

The higher costs per cow are due much to drought conditions, which caused higher feed and labor costs. Producers in regions with better grass likely saw lower costs, Tonsor said, adding that there’s good profit potential on the horizon for stocker operators due to strong feeder cattle markets.

Exports booming

The USDA’s long-term projections are that U.S. per capita beef consumption will increase from about 59.2 pounds this year to 60.9 pounds in 2019 and 2020. But beef exports also help keep prices up.

“We continue to set records in beef exports – despite talk about trade disruption,” Tonsor pointed out.

He said Japan continues to be a good market for U.S. beef. Between 1998 and 2002, Japan made up 45% of U.S. beef exports. That was before the 2003 BSE scare. Since then, Mexico and Canada have become much bigger buyers of U.S. beef, along with South Korea and other countries.

It’s estimated that more than 11% of U.S. beef and veal production will be exported in 2018, Tonsor said. That number is expected to get closer to 12% in 2019 and 2020. However, with uncertainty in trade agreements, those numbers could face pressure.

He sees even more pressure on pork exports, noting, “Over 30% of the market value for pork comes from export value.” 

Subscribe to Our Newsletters
BEEF Magazine is the source for beef production, management and market news.

You May Also Like