Cash cattle prices have moved higher this fall, supported by small cattle supplies, a generally favorable demand base, and low feed prices that have sent feeder cattle futures prices to record highs. The outlook suggests even higher prices in coming months.
Finished cattle prices fell to summer lows in early August, slightly below $120 per hundredweight. Prices recovered somewhat into the low $120s in August and September, but have recently moved toward $130. The anticipation of small beef supplies in the coming year has been well documented. Per capita beef supplies will likely be down about five percent for the rest of this year and well into 2014. The loss of cattle in South Dakota due to the early-October blizzard gained national attention and may have helped support the idea that cattle supplies would be even tighter. However, the reduction is not large in terms of the national impact.
Even at 100,000 head of losses, which is the upper end of estimates so far, that represents only one-tenth of one percent of the nation's 89 million head of cattle. If one-half of the animals were beef cows that still represents less than two-tenths of one percent of the nation's beef cow herd. Losses of this magnitude are huge for individuals, but not highly significant for beef supplies on a national basis. The blizzard losses would be expected to increase finished cattle prices by only 20 to 35 cents per hundredweight over the coming year.
Feeder cattle futures reached record high prices on October 14 at nearly $1.70 per pound, driven by a combination of high finished cattle futures and low feed prices. December corn futures, as an example, touched lows on October 14 at $4.32 per bushel. Calf prices have likely reached $175 per hundredweight, or higher, at Plains markets, although USDA reports have not been published due to the partial government shutdown which ended October 17. The direction of calf and feeder cattle prices will be determined by the strength of finished cattle prices and the direction of feed prices. Feed prices seem to hinge mostly on yields for corn and soybeans and on early signs of demand growth in the export market.
How much more upside is there in finished cattle markets? Prices are expected to move into the very-low $130s in November and average about $130 for the October to December quarter. Further strength is expected into March and April with highs reaching the mid-$130s. First quarter averages are expected to be about $133 and second quarter near $132. On an annual basis, cattle prices should set new record highs this year near $126 and break that record once again in 2014 with an average near $130 for the entire year.