Farm Talk

February 7, 2012

Experts predict tighter cattle supplies in 2012


CNHI

Parsons, Kansas — As cattle supplies remain tight and global demand intensifies profitability for cattle ranchers will continue in the year ahead, CattleFax analysts told cattlemen during remarks delivered at the 2012 Cattle Industry Convention and NCBA Trade Show in Nashville, Tenn.

“The economic signals are in place for restocking to begin this year,” said CattleFax Chief Executive Officer Randy Blach. “All we need now is a little encouragement from Mother Nature.”

Art Douglas, of Creighton University, set the expectation that, although there have been three months of near-normal rainfall in parts of Texas, drought will continue to play a role in determining if and when the cowherd expands. Douglas expects much of Texas to return to dry conditions by late-spring or early summer. He also predicts drought will spread into southern California, the Northern Plains and coastal areas of the southeast United States.

“By March a trough of low pressure should become established in the inland West and this will lower temperatures though precipitation will remain light at 75-90 percent of normal along the coast,” said Douglas. “These dry spring conditions will extend from the Pacific Northwest into the northern Plains. Dry spring weather is expected to persist in the Southeast where precipitation should run 80 percent of normal in coastal areas. Florida should show some improvement in moisture conditions by late spring.”

Despite shifting drought conditions, Blach told the audience he expects cattle inventory numbers will decline slightly in 2012 and reach a low point in 2013, before increasing in 2014 and beyond. Although herd growth may remain elusive, an increase in average carcass weights will partially offset the decline in inventory numbers, he said. The decline in cattle numbers means prices can be expected to move higher in 2012. Tight supplies of cattle and beef will be compounded by continued growth in the export markets, with expanded access into Japan and continued increases in the volume and value of beef being sold into export channels, according to Blach.

“We anticipate additional good news from Japan, perhaps during the first half of the year,” said Blach of the effort to expand trade to include beef derived from cattle up to 30 months of age.

He said Japan won’t be the only export market to see significant growth during 2012. In fact, U.S. beef exports, which set records in 2011, will likely set new highs in 2012 as a result of strong overall global demand and continued weakness in the U.S. dollar.