Lower break-even for cattle and hog producers

COLUMBIA, Mo.–Cattle prices have been at record highs the last few years. The reason is less meat on the market.

“Last year’s meat supply was 217.9 pounds per person, down 19.7 pounds from 2007 and the lowest since 1991,” said Ron Plain, University of Missouri Extension agricultural economist at the MU Spring Ag Marketing Outlook Conference. “Less meat on the market drives meat prices up. That allowed for record slaughter cattle prices.”

Plain says the forecast is for slightly more meat in 2013, changing the downward trend. The key to increased meat production is going to be better weather and higher yields so there is more feed to support more animals.

“The dry weather that we experienced last two years in most of the Midwest and a big chunk of the High Plains put a lot of beef cows in packing plants and has reduced the cow herd and the calf crop,” Plain said.

Cow slaughter this year is well below the levels seen in 2011 and 2012, but not low enough to begin rebuilding the cow herd, he said.

“If the weather keeps going the direction it is with more rainfall and better pastures, we could well see beef cow slaughter dropping to a low-enough level that we will be expanding the cow herd before the end of the year,” Plain said.

The cost of gain in feedlots is running about $1.10 per pound, but Plain says that may change.

“Feed costs are coming down and anticipation is that break-evens will come down also, which is good news because there has been a lot of red ink in cattle feeding lately,” Plain said.

Lower feed costs will decrease the break-even price for hogs as well. Plain says break-even was about $74 per hundredweight in January and probably will be around $62 per hundredweight by December.

Pig inventory hasn’t changed much from last year, Plain said. While the number of sows farrowing this spring and summer is expected to be lower, there may be more pork on the market because sows are having more pigs per litter and producers are feeding pigs to higher weights.  Slaughter will be higher than 2012, he says, but less than the 2008 record.  Hog prices are expected to average above 2012’s level but under that of 2011. 

“The last several quarters have been very tough for hog producers,” Plain said. “They were losing money at the start of this year. Based on the futures market, it looks like we may have only one month of profit this year. But the outlook is better in 2014 as we can factor in even lower corn and soymeal prices.”