What is in this article?:
- Expect big price swings in cattle market for 2012
- Higher corn, bean prices
- Next year’s cattle market will have the potential for some big price swings.
- Cattlemen will need to search for ways to lower their unit costs of production and ways to enhance market prices in order to achieve profitability during 2012.
Higher corn, bean prices
“Corn and soybean prices are expected to move higher in 2012 due to tight supplies worldwide,” says Prevatt. “Therefore, livestock farmers should seriously consider taking steps to manage their feed purchases during the 2011 crop harvest.”
Another factor that can affect feed prices and feeder calf and feeder cattle prices, he says, is the level of export demand for corn and soybeans.
“Any major changes in world export demand for these commodities could significantly move market prices. Economic growth in several Asian countries has begun to slow down, but has been above average during 2011. Additionally, the strength of the U.S. dollar is certain to influence the world export demand.
Unfortunately, says Prevatt, pasture and range conditions have not been better over many of the cow-calf states this year. The pasture and range conditions in September were rated as poor or very poor on 42 percent of the U.S. acreage in pasture and rangeland.
These poor pasture and forage conditions, coupled with higher input costs and higher cull cow prices, have resulted in a large number of cull cows moving to slaughter this year.
The current weather forecast suggests a continued La Niña condition which usually means warmer winter temperatures but lower rainfall in the Southeast.
Most states in the Southeast will show lower levels of hay production compared with 2010, notes the economist.
Additionally, higher inputs costs will contribute to continued high hay prices. Therefore, alternative winter forages and feedstuffs will be in much demand this winter as cattlemen seek to feed their cow herds and stocker cattle.
U.S. beef demand has felt some challenges the last three years due to high unemployment and tightening consumer grocery budgets due to the higher cost of living, says Prevatt. Domestic beef demand is expected to be further tested during 2012 as consumers continue to experience rising prices for most goods and services.
“If consumer disposable income does not rise proportionally, shopping habits and choices will shift as prices rise forcing consumers to substitute and/or reduce the bundle of goods and services they consume.
“The weak U.S. economy during 2011 has constrained domestic beef demand growth. Fortunately, world beef demand increased as world economies recovered from the recession and a weaker U.S. dollar contributed to increased beef exports.”
Per capita consumption of beef is expected to decline during 2011 and 2012, he says. “It is very important that the U.S. continues to grow beef export markets. These export markets could be worth $5 to $10 per hundredweight on the value of fed slaughter cattle. Growth in beef export markets will also help to moderate the price impacts of any weaknesses in U.S. broiler and pork exports.
U.S. meat production in 2012 is expected to show mixed results, he says, as beef production is expected to show a decrease, while pork and broiler production are expected to show small increases next year.
“Any changes in these production levels or export levels of pork and broilers could have a significant effect on U.S. beef prices.
“Additionally, any further increases in feedstuff prices will likely alter these 2012 production projections. A watchful eye on the production and export levels of competing meats and feed prices will help identify potential changes in beef prices.”