Last year was just a warm-up. If you thought selling cattle was fun in 2013, get ready, because the joyride is just beginning.

Burt Rutherford, Senior Editor

February 6, 2014

5 Min Read
CattleFax Outlook: Better Weather & Higher Prices In 2014

“I think we have to step back and look at 2014 in perspective and say this is one for the ages. We’re going to a new and higher trading range.”

With that, long-time CattleFax analyst Kevin Good set the stage for his prognostications about the cattle market this year and next. Suffice it to say, nobody was complaining when the annual CattleFax Outlook session at the Cattle Industry Convention, this week in Nashville, disbanded and cattlemen headed out to begin their volunteer work for the beef industry.

Clearly, Good says, a tight cattle supply situation is what is driving the market right now. And that tight supply will get tighter.

“We are in the process of expanding the U.S. beef cowherd,” he says. Cow slaughter was down 10% the second half of 2013, and his expectation is it will drop by about 500,000 year-over-year for 2014 and again in 2015.

The other component of the female side is the heifers, he says. Last year, the number of heifers as a percentage of slaughter was 36%. The January Cattle on Feed report showed heifers as a percentage of feedyard numbers was 32%. That’s the lowest it’s been in a decade, Good says. Meanwhile, USDA’s Cattle Inventory report showed heifers kept for replacement were up 90,000 head as 2014 kicked into road gear. “We think by the first of 2015 it will be up by a quarter-million head or more,” he told cattlemen.

That means fewer feeder cattle. Fewer feeder cattle means the flames of a red-hot market in 2013 will flare even brighter in the next few years.

His model suggests fed cattle prices will average about $135/cwt. in 2014. But there’s a wide and volatile range on either side of that, he cautions. He’s looking at a high somewhere in the upper $140s and even bumping $150 again. “But it also suggests some risk back into the mid $120s at some point for a summer low,” he says.

Yearlings will average in the upper $160s this year, he says. “That’s about a 13-14% increase year over year.” But we could very easily see feeder cattle trade in the mid to upper $170s, he adds. “So there’s quite a bit of potential there, especially if the corn crop comes through.”

Likewise, calf values are headed higher, he says, and will average $193 for the year. Green grass fever will keep calf prices at or above $2 into March and April, he predicts, before prices seasonally trend lower throughout the second half of the year. “But again, if corn values are moving lower throughout the year, that will tend to support calf values the second half of the year better than normal. And that’s typically what you see in a bull market, and we think we’re in that process today.”

Utility cows will probably be up 15% this year over last year, he says, as the market tries to pull them out of the breeding herd and into the grinding mix. And prices for bred cows will be up an average of 25%, he predicts, although that will depend a great deal on local forage and pasture conditions.

“But the bottom line is, values are going to increase substantially,” Good says.

Weather relief

Clearly, how quickly and to what extent heifer retention takes hold depends on Mother Nature. And the outlook there is good as well.

“El Niño is coming,” says CattleFax weatherman Art Douglas, professor emeritus at Creighton University. “I think this is a real positive thing we’ve got going here.”

Looking at the recent past, he says 2009-10 was an El Niño year. “As you went through the year of 2010, we had a lot of moisture from the western U.S. into the Midwest,” he explains, before the wheels fell off in 2011 and 2012.

He says that pattern will repeat itself this year. “This drought cycle of developing in the Southeast in 2010, spreading into the Southern Plains in 2011, the Midwest in 2012 and moving back to the West Coast is about ready to repeat itself.”

That means for 2014, growing conditions in the Midwest will be nearly ideal, with plenty of rain, warm temperatures in the spring to allow for early fieldwork and germination, then a cooler July and August as the crop pollinates and ears fill.

Drought areas in the West, particularly California and elsewhere on the West Coast, will see some relief this spring, he predicts, along with an increase in moisture into the Midwest and Plains.

For summer, he generally predicts adequate moisture for much of the cattle and corn-producing regions of the country. “The only concern might be below-normal precipitation forecast for the Ohio Valley,” he says.

So while the long-term drought may not be over, and cattlemen will see a repeat of the weather cycle that brought so much grief to various parts of the country the last 2-3 years, Mother Nature might provide at least a breather in 2014.

For many cattlemen, especially in the Southern Plains and the West, it can’t come soon enough.

 

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About the Author(s)

Burt Rutherford

Senior Editor, BEEF Magazine

Burt Rutherford is director of content and senior editor of BEEF. He has nearly 40 years’ experience communicating about the beef industry. A Colorado native and graduate of Colorado State University with a degree in agricultural journalism, he now works from his home base in Colorado. He worked as communications director for the North American Limousin Foundation and editor of the Western Livestock Journal before spending 21 years as communications director for the Texas Cattle Feeders Association. He works to keep BEEF readers informed of trends and production practices to bolster the bottom line.

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