Cattle Prices Softening
Due to U.S. Herd Expansion
Strong prices are expected through 2017, but as the cattle herd grows, prices will drop.
The nation’s beef cattle producers are in expansion mode and record-high cattle prices have likely seen the top, according to a Texas A&M AgriLife Extension Service livestock marketing economist.
“Over the long term, we are continuing to expand, and prices are coming down from record highs because we are expanding herds,” said David Anderson, College Station. “We are starting to increase supplies, and calf prices have been coming down. However, we will still see high prices since it will take some time to build our inventory back up.”
Beef demand continues to be strong, and Anderson said this has helped during times of record retail prices.
“I don’t think we’d have had prices where they were if it weren’t for consumer demand,” he said. “If you put consumer demand and price together, I think that’s pretty compelling for higher prices.”
Anderson pointed to the rise in gourmet hamburger chains across the United States.
“You have this huge growth in these specialized burger restaurants,” he said. “This coincides with one of the fewest supplies of cows in several decades. The second driver is the popularity of Texas-style barbecue. We’ve seen huge growth in barbecue restaurants nationwide. This comes at a time when we’ve also got the fewest cows. Overall, this is the strongest demand for beef in 25 years.”
Looking ahead to future cattle prices, Anderson said there are currently 2% more cows and 2% more calves in the United States than a year ago.
“Through 2017, I’ve got every quarter of the year projected with more beef production than the year before,” he said. “I think we can continue to look for strong cattle prices and positive-side demand for beef.”
Recent declines in calf and cattle prices are largely due to record-high cattle weights resulting in more beef production, Anderson said.
“More imported-beef and reduced exports are pressuring prices lower, too,” Anderson said. “But, as the fed-cattle backlog is reduced, then price will rebound higher.”
Anderson said for the first quarter of 2016 he projects Southern Plains #1 500- to 600-pound (lb.) steers at around $216-$222 per hundredweight (cwt.). Second-quarter prices in 2016 are projected at $220-$227 per cwt., while third-quarter prices are projected at $215-$224 per cwt. For the fourth quarter, Anderson projects prices to be $207-$216 per cwt.
Currently, some estimates of annual cow costs are around $700 per cow. Factoring in an average selling price of $1,100 per head for calves leaves cow-calf producers in a profitable position.
“Longer term, increasing cow numbers and beef production means prices are headed lower,” Anderson said.
Editor’s Note: Blair Fannin is a media relationship specialist with Texas A&M AgriLife Communications.