Feed Prices to Play Big Role in 2013 Cattle Prospects

2/9/2013 7:00 AM
By Michelle Kunjappu Reporter

LANCASTER, Pa. — Lou Moore, a retired Penn State Extension ag economist, pulled together observations, statistics and newspaper clippings to present his annual crystal-ball forecast at the Cattle Feeders Day in Lancaster.

Almost 200 cattle feeders and other industry representatives attended the Jan. 29 meeting, which included a slate of six beef-related topics.

“Agriculture is really in the headlines these days — everybody’s interested,” Moore said.

In the ag economy, there appears to be no recession, in contrast to the national economy, he said. However the U.S. is seeing slowing exports of most agricultural commodities.

U.S. Corn Supply

Although 70 percent of the U.S. landmass was in drought and “production last year was way down,” Moore said, but the total supply of corn was still an impressive 11.8 billion bushels.

The amount of corn used for food is holding relatively stable, he said, but the amount used for animal feed has gone way down and the amount used for fuel is going way up.

“The big change here is the amount that’s been increased for the use of ethanol production ... and decreased use for livestock because of high price,” he said.

Also notable is that of all the corn that is imported around the world, 65 percent comes from America, according to 2009 statistics.

“Soybeans are pretty much in the same situation as corn,” Moore said, adding that China imports almost 60 percent of the world’s supply but had good crops last year.

“Corn prices are putting a squeeze on the cattle industry; same thing in the hog industry,” he said.

Add in poultry and the broiler price versus corn price and “there is much in favor of selling corn rather than selling corn through livestock at the present time,” Moore said.

Cattle Market, Cattle Numbers

Moore said he expects the cattle market to rate about the same as it is now, or a bit stronger, for the coming year.

“Based on the way that the numbers have gone last January and July (when government cattle inventory reports came out), I would look for cattle numbers to be down 2 percent,” he said.

Moore said that America is looking at a declining U.S. cattle supply — the calf crop is going down, the breeding herd is going down, and it’s not likely to change.

According to Moore, 55 percent of the cattle in this country are in drought-designated areas, so “animals have been put into feedlots early because of the lack of pastures.”

Normally, with feeder calf prices strong, producers will start holding back beef heifers, “but they can’t do that because of high corn prices,” he said.

“So we have a smaller supply of animals, a smaller supply coming, fewer going into feedlots, and demand will be fairly high, but we’re in competition with pork and chicken,” Moore said.

With feedlot returns low and higher feeder cattle prices, “packers can’t pass on all the costs in this economy and high-valued cuts are not high enough,” he said.

Ag’s 2013 Forecast

Several factors will go into how 2013 looks for America’s agricultural sector, Moore said, including how meat producers deal with feed prices and how consumers adjust their consumption in a weak economy.

Moore predicted that consumers will “eat lower cuts of meat, which probably means more chicken, eggs and broilers.

“Demand is OK for the cheapest form of proteins, but still the feed price is too high — we keep coming back to that,” he said.

Across all of agriculture, “it’s going to be a really narrow margin business unless we get really good corn crops,” Moore said.

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