Beef Buzz News
High Current Cattle Market Prices Set Stage for 2014, Derrell Peel Says
Thu, 12 Dec 2013 11:28:42 CST
Cattle numbers are down in the markets as December rapidly slips by and Oklahoma State University Livestock Market Economist Dr. Derrell Peel says he's not expecting any big moves any time soon.
"We're kind of in this holiday period now where we're sort of coasting out the rest of the year I think, so we're not likely to see any major moves particularly given the levels where we're at. I wouldn't expect this market, necessarily, to have a lot of potential to strengthen, but, at the same time, it's holding pretty well through this holiday period at the current levels in terms of both fed cattle prices and wholesale prices."
Peel says he thinks the market is well positioned at this time coming off of a strong fall.
"We've transitioned into this tighter supply situation that we've been looking for for quite awhile. Both cattle slaughter and feed production are falling sharply here at the end of the year and that really sets the tone for the markets, I think, as we move into next year."
He says the markets are simply reflecting the reality of the supply fundamentals currently at play in terms of overall cattle numbers.
"When you dig into it a little bit, when you add in the various indications that we are, for example, saving more heifers out of the and beginning to do that heifer-retention thing, that will really take effect next year. But, it's pretty clear that's being reflected in the current price levels we're seeing."
Wheat pasture in Oklahoma was a little slow to develop in Oklahoma, Peel says, and that has not had much impact on markets.
As the new year shapes up, Peel said he is a little concerned that prices are already at record levels at the end of 2013.
"The word for 2014 is that we'll probably see new record prices across the board for feeder cattle, for fed cattle, for wholesale and retail beef prices. And, so, we're transitioning here. It's really a supply-driven market. We're looking at a seven-plus percent decrease in cattle slaughter next year. That'll translate into probably a six-and-a-half percent decrease in beef production. That's clearly going to put a lot of upward pressure on prices. And demand is still a question, but there are plenty of indications that demand is there relative to the supply of beef and we will continue to see higher prices across the board."
Peel says he expects herd rebuilding in a major way next year. He believes we will see a spike from a low set in January of 2014 to sharp increase of one to two percent in the cow herd by the end of the year-provided the weather cooperates.
"I think we have set ourselves up for a rather quick turnaround based on current conditions. Obviously, as we go through the winter, weather conditions and moisture conditions will be critical. Drought conditions in the country, generally, are somewhat moderated from what they have been for many months, but, in time, they could certainly turn around and go the other way. So, it's all contingent on those moisture conditions as we head into spring next year."
Feedlot operators will continue to struggle in the coming year, Peel says. Lower feed costs will be offset, for the most part, by higher feeder cattle prices with break-evens staring fairly high depending on beef demand staying high. If demand stays high pressure on feeder margins and packer margins should ease, Peel says.
The Beef Buzz is a regular feature heard on radio stations around the region on the Radio Oklahoma Network- but is also a regular audio feature found on this website as well. Click on the LISTEN BAR below for today's show- and check out our archives for older Beef Buzz shows covering the gamut of the beef cattle industry today.
Derrell Peel says high current cattle prices will affect 2014 markets in a number of different ways.
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