There's Still Time For Cattle Prices To Rebound

There's Still Time For Cattle Prices To Rebound

Purdue University economist Chris Hurt says previous estimates of lower cattle prices may not be accurate

Although finished cattle prices that were expected to increase this year remained low throughout the first quarter, there's still time for a rebound, according to Purdue University Extension economist Chris Hurt.

Hurt noted earlier this year that beef production had the potential to decline 3% for the first half of the year and cattle prices may be reaching the low $130s by now, but that hasn't happened.

"So far this year, beef supplies have been down close to 1%," he said. "That means more beef than we expected, and more beef is certainly one of the contributors to lower cattle prices."

Purdue University economist Chris Hurt says previous estimates of lower cattle prices may not be accurate

More supply isn't the only component of the lower-than-expected beef prices. Additional contributors include a weaker U.S. economy, reduced pork and chicken exports and high retail beef prices, he notes.

"The weak U.S. economy has many consumers shopping for value and beef has had higher retail price increases as compared with competitive animal proteins," Hurt said. "As an example, retail choice beef prices have been at record-high levels this year, reaching $5.30 per retail pound in the month of March."

In the past six months, beef prices have risen 6% more than pork, 10% over turkey, 4% over chicken and 7% more than eggs. Those higher beef prices and lower animal exports have created more competition in the domestic market for beef, Hurt said.

Continued small supplies of beef for the rest of the year suggests a brighter future for cattle prices, he added.

"Last-quarter supplies could drop by 6% to 7%, with prices rising into the low $130s," he said. "First-quarter prices for next year should improve a few dollars toward the low- to mid-$130s. These forecasts are all higher than current futures prices."

If crop yields are closer to normal this year and corn is about $5 a bushel by harvest, those much lower feed prices will stimulate expansion of all animal species.

Hurt said with lower feed prices and improved pasture conditions, cattle producers are expected to retain more heifers. These early stages of herd expansion will draw the beef supply down even more and lead to higher cattle prices.

"This all suggests better days ahead for both finished cattle and calf prices," he said.

For a daily recap of livestock markets, head over to FarmFutures.com and check out John Otte's Livestock Call column.

Source: Purdue University

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