Cow-calf producers are in the best profit position among beef-cattle segments coming into 2013. Stocker operators also have good profit potential, but cattle feeders and packers will continue to face tight margins, according to Cattle-Fax. Analysts Lance Zimmerman and Todd Kalous presented their latest projections to an international group of beef producers hosted by Novus International during their Global Beef Roundtable this week.
The group included individuals from Australia, Brazil and Mexico, along with Novus representatives and media from the United States.
The analysts say on average, cow-calf producers are earning $150 to $200 per head on their calves this year and good profitability will continue through 2013. Prices for all classes of cattle are likely to continue moving higher, but the rate of increase is slowing as the high price of beef begins to affect demand.
In spite of the 2012 drought, which affected at least 50 percent of the U.S. cow herd, cow slaughter dropped off compared to the 2011 rate. Zimmerman says producers in the Midwest have been highly motivated to keep their cows and are using a variety of alternative feeds to carry them through the winter in hopes of better conditions to come. If the drought continues over a wide area, we could see increased culling during the next year.
Cattle Fax expects the rate of U.S. cow culling to drop off 5 percent this year relative to 2011, and drop another 11 percent during 2013. Heifer slaughter has slowed somewhat, indicating producers in some areas are beginning to hold more heifers for breeding.
Eventually, as conditions improve, producers will begin rebuilding herds. A question though, is just how many more cattle we need, as beef production per cow continues to grow. Assuming that domestic per-capita beef consumption holds steady at around 57 pounds per year, beef exports expand to 20 percent of production and carcass weights level off, Cattle Fax says we will need to add four million more cows to U.S. herds over the next decade. If carcass weights continue to increase at the current trend line of about six pounds per year, we will need to add just two million cows to meet demand by 2022.
This year, supplies of calves and feeder cattle are down by over a million head. For 2013, Cattle-Fax projects a smaller decline of 200,000 head. The group expects our cow numbers to stabilize at around 29 million head over the next two years.
Domestic beef demand this year is down somewhat from 2011, largely due to higher prices, and beef demand for 2013 will depend largely on the overall economy. A 1 percent change in real income – up or down – affects beef demand by an equal percentage the analysts say.
For 2012, Cattle-Fax projects fed-cattle prices to average $122 per hundredweight, 750-pound feeders to average $150, 550-pound calves to average $170 and the beef cutout to average $188. During 2013, they expect all those prices to move higher, with fed cattle averaging $128 per hundredweight, 750-pound feeders averaging $166, 550-pound calves averaging $185 and the beef cutout averaging $196.