Record beef, cattle prices, but negative margins

by Meat&Poultry Staff
Share This:

WASHINGTON – Through the week of Dec. 31, cumulative weekly federally inspected “other” cow slaughter — mostly beef cows — was approximately 5 percent above the same year earlier period, and was more than 14 percent above same period in 2009. Total annual commercial cow slaughter has been observed at current levels only one time since 1987 — in 1996, also a drought year, according to the Jan. 19 Livestock, Dairy and Poultry Outlook from the US Department of Agriculture’s Economic Research Service.

Commercial cow slaughter in 2011 is on track to equal around 17 percent of the Jan. 1, 2011, cow inventory compared with 14.9 percent of the Jan. 1, 1987, cow inventory and 16.3 percent of Jan. 1, 1996.

The drought affected an area accounting for roughly 40 percent of the national beef cow inventory. For the most part, the other 60 percent of beef cows in the US enjoyed average or better pasture conditions, and adjustments to their cow inventories could offset to some extent what happened in the south.

Despite the most severe drought in recorded Texas history, record-high corn prices throughout 2011 and recent rains have supported feeder cattle prices, producing several records and pushing some lighter weight feeder cattle prices to $200 or more per cwt.

Calves from heifers retained for breeding in 2012 will not be ready for slaughter until 2014 or later. Producers’ resolve to retain heifers to increase cow herds could likely be tested as heifer prices rise in the face of increasing demand for feeder cattle over the next few years.

Through November 2011, net placements of feeder cattle in feedlots of 1,000 head or more averaged 2 percent higher than the 2010 average. Net placements in 2010 averaged over 5 percent higher than 2009 placements.

November marketings of fed cattle from 1,000-plus-head feedlots were less than 1 percent below year-earlier marketings. However, marketings for all of 2011 are likely to exceed 2010’s marketings.

For the second half of 2012 and beyond, the outlook for steer and heifer prices is slightly more bullish as second-half 2012 slaughter is expected to be lower than second-half 2011 slaughter. Activities in feedlots of less than 1,000 head could alter this scenario.

Wholesale beef cutout values have been on a roller coaster for much of the year. Although cutout values in 2011 have been at levels well above both 2010 levels and the three-year average, except for a period in March and again during late May through September, packers have been unable to maintain sufficient pressure on cattle feeders to lower fed cattle prices enough to widen wholesale margins.

And despite record retail prices, packers have also been unable to pass enough of the higher prices through to retailers to keep average packer margins in the black. Retail prices in 2012 are expected to surpass 2011 prices, but by how much will depend on the economic recovery, beef imports, and prices for pork and poultry.

Comment on this Article
We welcome your thoughtful comments. Please comply with our Community rules.

 

 


The views expressed in the comments section of Meat and Poultry News do not reflect those of Meat and Poultry News or its parent company, Sosland Publishing Co., Kansas City, Mo. Concern regarding a specific comment may be registered with the Editor by clicking the Report Abuse link.