“The economic incentive will be there for cow-calf producers to expand this year,” says Kevin Good, CattleFax analyst. “We just need some help from Mother Nature.”

Between snugger cattle numbers and anticipated continued strong U.S. beef export demand, Good expects calf prices to gain another 15% this year for an average of $175/cwt. (550 lb. steer). That equates to an average increase of almost $157/head. He sees a seasonal price range of 15%, from $162-$188/cwt. with the highs coming in the spring.

Feeder cattle prices (750 lb. steer) should average near $150/cwt. in 2012, according to Good. That would add up to about $145/head more on average. He also expects seasonal feeder cattle prices to trade across a 15% range, from $139/cwt. to $160/cwt.

As for fed cattle, Good sees the average at $122/cwt. in 2012 with support at $110-$115/cwt. and resistance at $130-$134/cwt.

In general terms, CattleFax analysts say cow-calf producers are in the driver’s seat this year with anticipated record-high cattle value that should more than offset increasing input cost. They explain profit margins should continue positive for stocker producers and backgounders, but with narrower margins than the last couple of years.

Feedlot profitability, on the other hand, is expected to remain negative, demanding risk management. Plenty of the red ink on feedlot closeouts continues to revolve around high feed costs.

Mike Murphy, CattleFax analyst, expects spot corn futures for the first half of 2012 to meet resistance at $6.50-$6.75/bu. and support at $5.50-$5.75/bu. During the second half of the year, he sees resistance at $6.25-$6.50/bu. and support at $5.00-$5.75/bu.

Though corn stocks remain low, CattleFax pegs U.S. corn planting in 2012 at almost 94 million acres producing 161.4 bu/acre (about the trend-line yield. Murphy says these estimates consider the possibility of a cooler, wetter spring and summer in the Corn Belt.

Roll all of the beads on the abacus together and CattleFax analysts believe Choice cutout value will average more than $200/cwt. this year ($10.50 average Ch-Se spread). In turn, they expect new record-high retail beef prices as higher wholesale and fed cattle prices are passed along to consumers.

“Consumers will likely continue to trade down for more affordable beef purchases, meaning demand for ground beef will improve compared to higher priced steak items,” they explain.

Editor's Note: This article is part of a new weekly e-newsletter called Cattle Market Weekly. Find the full issue here and listen to the audio recap here.