 "Pastures and ranges have returned to favorable conditions for
much of the country, including the Northeast, the Southeast, the
Midwest and the northern Great Plains," said Chris Hurt.
"Improvement is also noted for the central and southern Plains,
although drought conditions are still lingering. Texas, Oklahoma
and Kansas have received some recent rains that may help to
continue the abatement of drought. Nationally, 73 percent of
pastures are rated in the fair, good or excellent condition this
year, compared to only 46 percent at this time last year.
"Markets are expecting feed prices to drop sharply when
new-crop harvest gets underway. New-crop corn prices are about
$2 per bushel lower than nearby bids, and fall soybean meal
prices could be as much as $200 per ton lower than current
scarce old-crop offers," Hurt said.
He said that beef cow operations in some parts of the country
where pastures have been restored are probably getting ready to
retain heifers. Beef cow numbers have declined in the Southeast
by about 700,000 head, or 12 percent, since 2007. Midwest
numbers have dropped by 680,000 head, or 14 percent, since 2007.
Both of these areas should have the pasture and the feed to
begin heifer retention. The northern Plains is another area that
is ripe for herd expansion.
"On the other hand, pasture and range recovery have not
reached a critical mass for expansion in the central and
southern Plains and western United States," Hurt said. "These
regions include 43 percent of the beef cows and have had a 14
percent drop in those numbers since 2007. More rain and more
improvement in pastures and ranges will be required," he said.
According to Hurt, the initial retention of heifers will
likely occur this fall in areas primarily east of the
Mississippi River, plus the Delta, the western Corn Belt and the
northern Great Plains. This is a large area that currently has
57 percent of the nation’s beef cows.
"Lower feed prices alone will not be enough to get retention
started, but higher calf prices will be required as well," Hurt
said. "That process is also underway. Oklahoma 500- to 550-pound
calves have increased by about 15 cents per pound since early
June, and 600-to 650-pound steer calves have increased by 13
cents per pound. Current prices are $1.65 and $1.55 per pound,
respectively."
However, Hurt added, these levels are not likely to stimulate
any major beef cow herd expansion. It is more likely that prices
of $1.75 to $2 may be required to convince brood cow operations
to move aggressively toward more cows.
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"The already low inventory of finished cattle and some added heifer
retention will keep beef supplies falling in the coming 12 months,"
Hurt said. "USDA expects beef production to be down about 4 percent
in the last half of 2013 and by 5 percent in the first half of 2014.
This should provide the foundation for finished beef prices to
average in the higher $120s to low $130s. These finished cattle
prices, along with lower feed prices, should propel calf prices back
to $1.75 per pound and higher," he said.
Finished cattle prices are expected to trade in the low $120s per
hundredweight in the third quarter but move to the higher $120s for
the final quarter of 2013. First-half 2014 prices are expected to
average near $130, with early spring highs in the low to mid-$130s.
Calf and feeder cattle prices should follow the finished cattle
prices higher, especially as feed prices also drop.
"The industry may see the start of heifer retention this fall,
but the magnitude of expansion is expected to be low and slow to get
underway," Hurt said. "Beef cow producers know that expansion of the
herd is a long-term investment and generally want an extended period
of favorable returns before making major financial commitments. In
addition, nearly half of the country’s cows are in regions that have
not yet fully emerged from the drought."
Hurt said that prices of calves may need to move closer to $2 per
pound to provide the incentive that will provide for a more major
beef expansion.
"Both the poultry and pork industries are set to increase
production rapidly as feed prices decline," Hurt said. "Retail beef
prices, already at record highs, will move even higher in the coming
12 months -- at a time when poultry and pork price increases are
moderating or even falling. This will mean stiff competition for
beef among domestic and foreign consumers," he said.
[Text from file received from the
University of Illinois College of Agricultural, Consumer and
Environmental Sciences]
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