Live-cattle futures have jumped 10.2% so far this year, a gain that is leading to higher wholesale beef prices and is widely expected to result in record U.S. consumer prices for steaks, ground beef and other products this year.
Cattle futures for April delivery rose to $1.45175 a pound. Thursday, the price reached a record $1.45975. Feeder-cattle futures for May settlement dropped after reaching $1.7525 on Thursday.
Wholesale prices of beef, meanwhile, continue to make consecutive new record highs for most-common choice and select grades of beef. Better grazing conditions and lower feed costs have some ranchers retaining females to expand breeding herd. This has the near-term effect of further pinching supplies headed for slaughter.
There are just over 89 million cattle heads in the USA but those numbers are down from 94 million in 2010. Pasture land doesn’t recover from drought in just one or two years, so ranchers have to maintain lower herd sizes even when the weather improves. It did so this year, but numerous articles in local farming community newspapers seem to indicate that ranchers remain cautious despite this year’s better environment. Bottom line: U.S. herds are at a 60 year low and seem likely to remain depressed. For a long term frame of reference, consider that the peak was just over 103 million head of cattle in 1996.
In its summary for February 25th, the US Drought Monitor indicates that “California remained the focal point of a U.S. drought that stretches from the Pacific Coast to portions of the Mississippi Valley. During the 7-day drought-monitoring period, which ended early on February 25, generally dry weather prevailed in key drought areas from California to the southern High Plains. Farther north, however, rain and snow further chipped away at dryness and drought in the Northwest. Emerging dryness became an issue from the eastern Plains (Kansas to Texas) eastward into the middle and lower Mississippi Valley, while heavy rain fell in the central Gulf Coast region. Elsewhere, the year’s first widespread severe weather outbreak—accompanied by locally heavy showers—struck the Southeast and lower Midwest on February 20-21, while wind-driven snow fell from Iowa northward into the upper Great Lakes region.”.
This month, the USDA lowered its 2014 forecast for red-meat production and boosted the outlook for cattle and hog costs. Higher meat prices will raise expenses for retailers, while grocery shoppers will pay as much as 3.5 percent more for meat this year, compared with a 1.2 percent increase in 2013, the government projects.
“Total beef production is going to be down, and that’s one of the few commodities that we’re projected to see the supplies tighten this next year,” Don Roose, the president of U.S. Commodities Inc. in West Des Moines, Iowa, said in a telephone interview. “For hogs and cattles, the supplies are expected to continue to stay tight all the way into the spring. Funds are piling into the long side.”