Booming Outlook For Livestock Producers

US livestock producers may be looking at an economic “mini-boom” for the next several years as long as feed costs remain comparatively low.

Chris Hurt, agricultural economist at Purdue University, said the current record-high prices being received for livestock combined with low feed costs present an environment for herd growth.  He also credited rising per capita meat consumption and tight supplies for his prediction of a mini-boom for producers.

The amount of meat available for consumption per capita when corn was $2 a bushel was about 220 pounds.  This year, only 200 pounds are available.

“We can expect that a portion of this lost consumption will be recovered in the next three to five years as producers increase supplies and drive down retail prices of animal products,” Hurt said.




Prices for slaughter-ready cattle appear to be strong for now and could give only a passing nod to a post-Thanksgiving slump in the five-year average.  Average fed cattle prices this year show a rising trend since the middle of the year, diverging slowly but relentlessly from last year and the average.

Sources credited tight supplies of fed cattle for last week’s push to $170 to $172 per cwt on a live basis.

Last week, fed cattle prices in the Southern Plains reached an average of $171.61 per cwt, a jump of $4.72, or 2.83%, above the previous week’s $166.89.  This took prices $40.08, or 30.5%, above a year earlier and $67.46, or 64.8%, above the average.

And given this week’s gain in wholesale beef prices, sources say the market can expect steady to higher fed cattle prices again this week, even though packer buyers have yet to bid on feedlot showlists, which are down from last week.

The USDA’s carcass cutout price for choice beef Wednesday was $254.79 per cwt, a gain of $0.50 from Tuesday and a bump of $3.35 over $251.44 a week earlier.

The select beef cutout was $242.05 per cwt, up $0.79 on the day and up $3.30 from $238.75 a week earlier.

The choice/select spread narrowed to $12.74 Wednesday, a move that follows last year and put it slightly below the average of $12.87.




The fly in the ointment for livestock producers is that market forces could conspire to reduce next year’s corn production and thus increase prices.

The Food and Agricultural Policy Research Institute this week projected a 2014/15 farmgate corn price of $3.50 a bushel.  While this is down significantly from the 2013/14 price of $4.46, it still is below next year’s projected price of $3.89.

FAPRI economists said it had reduced slightly its estimate of this year’s corn crop and projected acreage next year to be down as farmers switched to soybeans.

And if drought or pestilence cut into next year’s corn production, feed costs could go even higher.

Mitigating some of the push to higher prices for US corn in the short term is the rising US Dollar.  It already has moved some business to South America or the Black Sea, leaving US product to fight over the domestic market.




The price of feeder cattle also could eat into profits as supplies remain tight, although regional differences likely will make some a better bargain than others.

The CME Feeder Cattle Index often is used as a barometer for the feeder cattle market and for the seven days ended Tuesday was $240.10, up $0.01 from Monday.  The Index is holding near steady, but spring prices could resume their upward trek.