Tight Beef Supplies Mean Record Prices, CattleFax Says

U.S. beef output will slide this year after a prolonged drought, sending cattle prices to all-time highs, according to industry researcher CattleFax.

Production of the meat will drop 2.4 percent as cattle slaughter falls, and per-capita beef supplies may slide 2.3 percent to 56.1 pounds, according to CattleFax. Average prices for all classes of cattle will climb to all-time highs this year, the researcher forecast.

Cattle futures in Chicago have climbed for four straight years, surging 54 percent since the end of 2008 to Dec. 31 as the U.S. herd shrank. The worst U.S. drought since the 1930s boosted the cost of feed for livestock last year. Improving weather this year and higher prices may help to increase the number of animals by 2014, CattleFax said.

“The economic incentive is there to expand,” Kevin Good, a market analyst at CattleFax, said during a presentation at an industry convention in Tampa, Florida. “We do expect to see some of that as soon as Mother Nature cooperates.”

Fed-cattle cash prices may average $1.26 a pound this year, up 2.4 percent from 2012, and cash prices for a 750-pound (340 kilograms) steer may average $1.55 a pound, up 5.8 percent, the researcher said. Calf prices will average $1.75, up 4.8 percent.

All fresh retail-beef prices may average $4.85 a pound this year, up 4 percent from 2012, CattleFax said. U.S. demand for wholesale beef demand may drop 2 percent, while exports rise 3 percent driven by demand in emerging countries, Mike Murphy, a CattleFax market analyst said during a presentation.

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