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Cattle prices - will 2013 bring a fifth year of gains?

Cattle prices rose for a fourth successive year in Chicago in 2012, by 7.5% for live cattle, those that have been finished, and 3.4% for feeder cattle, those ready for fattening.

Values increased to ration demand in the face of increasing feed bills, which producers had some success in passing on, given the dwindling US herd.

Assuming grain prices drop in 2013, and pasture conditions improve, will that feed through into falling cattle values? Or will it spur extra demand, for feeder cattle at least, as producers rebuild herds?

Leading commentators give their verdicts.

Dillon Fuez, Co-operative Extension, Utah State University

"Calf and feeder cattle prices will likely be even higher next year. There is just such a short supply of feeder cattle because of reduced cow herd numbers. These prices will be bid higher.

"If corn production is anything close to normal next year, than corn prices should be lower and this will also support higher calf and feeder cattle prices. Because of the relatively short supply of cattle, there will be fewer cattle in feedlots and fewer fed cattle to sell, and so fed cattle prices may set yet another record in 2013.

"If the drought conditions moderate in 2013, than cow-calf producers will likely see higher profits next year. Stocker operations may or may not be profitable depending upon their individual buy-sell margins. That is always the nature of that industry.

"However, given the strength of heavier feeder cattle prices relative to calf prices, I would anticipate that most stocker operators should see positive returns. Feedlots will likely still struggle to see positive returns.

"I know we are starting to take feeding capacity out of production. That is a difficult process as it usually involves forced and not voluntary liquidations. I would expect there are still a couple of difficult years ahead for cattle feeders."

Darrel Good, Department of Agricultural and Consumer Economics, University of Illinois

"US beef production is expected to decline from 25.7bn pounds in 2012 to 24.6bn pounds in 2013.

"From a 19-year low of 460m pounds in 2004, US beef exports grew to 2.79bn pounds in 2011, but declined to 2.47bn pounds in 2012.

"Declining production is expected to limit exports to 2.45bn pounds in 2013. Domestic per capita beef supplies in 2013 are projected at 54.8 pounds, down from 56.8 pounds in 2012.

"Fed cattle prices averaged near $122 per hundredweight in 2012 and are projected to average near $125 per hundredweight in 2013."

Morgan Stanley

"We are bearish feed cattle prices, as record poor pasture conditions should extend the cow-calf liquidation cycle, pushing up available feeder supply.

"High feed costs are likely to promote a slowdown in feedlot placement, lowering feeder demand.

"Available feeder cattle supply should rise year on year by the end of 2013 as the impact of the heifer retentions in the second half of 2011 reaches the market.

"Live cattle prices, on average, should strengthen in 2013 as skyrocketing feed costs force yet another year of contraction in the US cattle herd. However, slowing beef demand, both domestic and overseas, and weak packer margins keep us less bullish than the market.

"Higher beef prices pose a threat to export growth. US per capita been consumption should decline by 1,8% year on year owing to record-high prices and expected weak US income growth."

Paragon Economics and Steiner Consulting

"The US Department of Agriculture expects a decline in beef output for 2013.

"This is likely predicate d on a pullback in total cattle slaughter of almost 5% and carcass weight gains at trend levels of about 0.5% annual growth.

"Just as was the case this year, moisture conditions, feed availability and the use of feed additives to improve performance will be critical drivers that could impact the forecast.

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