US fed cattle prices reach record levels in first quarter
Prices to remain steady through first half of year, increase expected in second half
U.S. fed cattle prices traded at record levels in the first quarter of 2012, with an average year-to-date price of $1.26 per pound and a peak price of $1.30 per pound in the first week of March, according to Rabo AgriFinance's Quarterly Beef Outlook.
Cattle on feed numbers remain strong, with a 1 percent to 3 percent increase over 2011. During this time, federally inspected slaughter ran 6 percent below 2011 levels, and 5 percent below the five-year average. “Prices for U.S.-fed cattle should remain near $1.15 through mid-summer, before posting a sharp price recovery for the second half of the year,” said David Nelson, global strategist with the Rabobank Food & Agribusiness Research and Advisory group. “Restricted supplies and seasonal considerations should drive the price recovery.”
Steer carcass weights have been abnormally high, holding at 20 to 21 pounds over the same period in 2011, and the five-year average. Despite the increase in steer carcass weights, U.S. beef production was down 3.4 percent from 2011 numbers, as of mid-April. Globally, once the larger supply of Brazilian cattle plays itself out in the second quarter, cattle prices should recover. Following that short-term supply bulge, Rabobank expects most beef-producing countries to go through liquidation, a retention cycle or weather-related problems.
“Global meat protein, especially beef supplies, will continue to hamper profit and herd growth in important emerging markets,” said Nelson. “This will support prices, while raising volume and cost risks to processors and price risks to buyers.”