Wheat prices are expected to hold well into next year, and farmland values are expected to stay strong. Beef cattle prices likely will remain strong as well but producers must manage production costs, especially feed, closely. Farmers and ranchers also will face more rules and regulations as the pace for regulatory change continues to increase for farms and small businesses.

That’s the gist of an economic outlook presented by a quartet of Oklahoma State University Extension economists recently at the third annual Rural Economic Outlook Conference in Stillwater.

Derrel Peel, Breedlove Professor of Agribusiness and livestock marketing specialist, said drought continues to weigh heavily on the beef industry with continued herd liquidation, record high grain, forage and replacement cattle prices. Producers are experiencing reduced cow-calf profitability, and feedlot and packer margins have been poor. Herd liquidation also has resulted in higher wholesale beef prices, more limited beef demand and weaker beef exports.

That’s a recap, he said for 2012. For 2013, the industry wonders if drought will persist, accompanied by even more liquidation. Or will more normal weather mean higher heifer retention? He anticipates tighter cattle supplies into 2014. “Beef demand is the key unknown and is tied to the general economy.”

Cattle and beef prices, he said, will push higher because of limited supplies next year. “Beef production is down by 4.5 percent. Beef demand will limit price increases, however.”

Other factors that could affect the cattle markets are how much higher beef prices will move before hitting a barrier and whether and how much feed prices will moderate. Higher cow and heifer prices also will influence the cattle market and breeding cow and heifer demand.

Cow-calf operators have opportunities for good profit but must manage costs. “Stockers offer good value with gain but packers and feedlots will continue to struggle and loss of capacity is likely. Production challenges will be bigger than marketing challenges.”

Peel said the industry will be a long time in transition. “We expect a long period of limited cattle supply.”