TAMPA, Fla. - U.S. cattle and beef prices should set more record highs this year as the worst drought in half a century, which wilted pastures and drove up feed costs, forced producers to trim the nation's herd to the smallest since 1952, according to industry marketing and analytics firm CattleFax.

Prices for slaughter-ready cattle, or fed cattle, could average $126 per cwt, up $3 from last year, which would be a fourth consecutive yearly increase, Cattlefax CEO Randy Blach said during a Friday session at the National Cattlemen's Beef Association annual meeting.

"We'll see record high fed cattle prices at some point here in the spring where we'll see the market top the $130 level of last year," said Blach.

That forecast is based on more declines in cattle herd due to the drought in the southwestern United States, a seasonal decline in slaughter-ready cattle during the spring and stronger beef exports.

Separately, the U.S. Agriculture Department released its monthly production report on Friday, in which it forecast 2013 slaughter steer prices of $124 to $132 in the spring quarter, $125 to $135 in the third quarter, and $127 to $137 in the fourth quarter

Higher meat prices forecast
Grocery shoppers can expect record high beef prices in 2013, with the retail price seen on average at $4.85 per lb, up 4 pct from 2012, said Blach.

Retail prices hit a record high of $5.15 per lb in November before easing to $5.11 last month, according to USDA.

In addition to record beef prices, Blach said pork and poultry prices have also increased in the last few months.

"All of those protein prices are going to get higher," he said.

Escalation in meat prices may be slowed as consumers remain cautious buyers in the slowly recovering domestic economy.

"The demand side of the puzzle doesn't appear to be any better than steady. We're just not going to have as much disposable income," he said.

If beef prices are to come down, feed and hay costs will have to decline to encourage producers to expand the U.S. cattle herd.

"We've got to see expansion of the herd. If we were to start expanding tomorrow, we're 30 months down the road before we can really impact production. So, prices are going to stay elevated for quite some time until we can respond to Mother Nature's signal to re-grow the herd," said Blach.

In its Friday report, USDA forecast 2013 U.S. beef production at 25.19 billion lbs, down 3 percent from 2012.