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Live cattle futures - will they rise in 2015 for a sixth successive year?

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It was another strong year for live cattle futures, which ended 2014 up 23% - a fifth successive annual increase.

The rise was driven by the return to growth in the US cattle herd, after a fall at the start of 2014 to its lowest since 1951, a drop driven by drought and elevated feed and grain prices, besides greater productivity allowing more beef production per animal.

Record beef prices and lower grain prices have boosted margins for cattle breeders, as well as feedlots.

Can the squeezed market, and the trend of rising prices, last for a sixth year?

Paragon Economics and Steiner Consulting

"You can put all of the profit incentives you want in place and still not get beef cow herd expansion if you don't have grass.

"Grazing conditions were much better this year in the vast majority of the country and that has led to a substantial amount of heifer retention.

"Whether that continues depends on spring rains. Most of the cows still reside in semi–arid or arid regions in which drought is always just a few months or even weeks away.

"The heifers retained so far will, for the most part, calve this spring so we should see more calves available in the fall. The question is whether retention will continue in 2015, thus continuing to remove animals from the market flow and building the cow herd even more."

Rabobank

"Record price levels are expected, as US beef production will likely post another 2-3% decline in 2015, after already experiencing a 5% decline in 2014.

"US cow slaughter was down 14% in 2014 due to aggressive herd rebuilding, which is expected to continue into 2015.

"An expected moderate rebound in pork and chicken supply might ease beef prices. However, due to the overall tight market fundamentals, we expect the market to trade towards record levels in the first half of the year, before levelling to a more traditional seasonal pattern for the second half of the year.

"All of these factors will reduce beef availability and are expected to drive markets to new record price levels."

Societe Generale

"US cattle supplies remain tight with herd expansion in full effect.

Societe Generale live cattle price forecasts, 2015

Q1: 175.47 cents a pound

Q2: 179.48 cents a pound

Q3: 173.46 cents a pound

Q4: 167.44 cents a pound

Prices: quarter average, front Chicago futures contract

"Steer calves, on the other hand, have been placed onto pasture to take advantage of even more economical gain before being placed in feedlots to finishing weight.

"Combined, this further reduces the availability of already limited feeder cattle. In many cases, this leaves the heaviest weight calves as the only alternative to place into feedlots

"Meanwhile, the improving recovery in the US economy helps support beef consumption. Lower fuel prices have also helped moderate the 'wallet spend' of US consumers. Falling gasoline prices have helped offset the higher cost of beef, and other meats, which is supporting beef demand."

University of Illinois

"US beef production is expected to decline from 24.46bn pounds in 2014 to 23.67bn pounds in 2015.

"Exports are expected to decline from 2.6bn to 2.5bn pounds, while imports decline from 2.8bn to 2.7bn pounds.

"Domestic per capita beef supplies in 2015 are projected at an historic low of 52.2 pounds, down from 54.6 pounds in 2014.

"Fed cattle prices averaged near $155 a hundredweight in 2014 and are projected to average near $160 in 2015, with highest prices in the first half of the year."

By Agrimoney.com

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