Declining inventories push beef prices higher

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Declining inventories for cattle and an ongoing deficit in world grain production point the way to higher beef prices.

That’s the assessment of Andrew Gottschalk, who told those attending the Mississippi Farm Bureau Federation’s Winter Commodity Conference that “no matter how you cut it, the long term trend for beef is bullish.”

“There is no indication of herd expansion in the U.S., Canada, or Mexico,” says the senior vice president of R.J. O’Brien & Associates and owner of HedgersEdge.com.

“Per capita meat supply will decline in 2011, which usually pushes up prices.”

Even though animal numbers have been declining, Gottschalk says, total U.S. beef production has remained basically flat due to increases in carcass weights.

“When you can raise more and sell it at higher prices, it doesn’t get any better than that.”

High grain prices will also play a role in pushing prices up, he says.

“Since 2001, we’ve only had three years when world grain production exceeded consumption. For seven of 10 years, we’ve seen a deficit in grain production.”

Increases in pork production by China, which has more than half-a-billion pigs, and poultry in Russia will further increase demand for grains.

U.S. beef exports were up 23 percent last year, Gottschalk says, while pork saw a 3 percent increase. For 2011, the USDA is forecasting beef exports unchanged, but he says he “would not be surprised to see another 5 percent to 10 percent increase in beef exports.” Pork exports are projected by the USDA to increase 9.8 percent and poultry 4 percent.

And at retail, “We’re seeing he highest cash prices ever for beef, pork, and poultry. I think the greatest growth will be in broilers, since it’s an easy entry business and has a quick turnaround.

“Given what we know today, I would look for fat cattle prices to average about $102 in 2011, fed cattle $95 to $112, and hogs about $80.”

Dairy producers, Gottschalk says, “will continue to be squeezed.”

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