Tuesday, June 26, 2007
Revised Long-Run Beef Planning Prices
I combined USDA's Long-Run Cattle Planning Prices and my Long-Run Cattle Planning Prices in the new planning price chart presented here. The USDA Planning Prices were generated in response to the emerging biofuels era.
USDA projects that feeder cattle prices will adjust downward over the next 3 or 4 years trying to find the new equilbrium with the emerging biofuels era of increased corn prices. With corn prices projected to average higher in 2008, we could well see some feeder cattle price adjustments for the next 18-24 months.
They project that once that equilbrium is found around 2009 to 2010, beef cow producers will begin to expand the beef cow herd driving prices up for the first few years of the expansion. The expanded production will eventually pull beef prices back down by 2015 or so.
Feeder cattle prices are projected to make the biggest adjustment (compared to feeder calf prices) due to increased corn prices. Limited beef cow numbers, coupled with over capacity in the feedlot sector, is projected to add strength to feeder calf prices. Relatively high calf prices, coupled with lower costs of gain for growing feeders on forages, suggests that the industry will be able to adjust to the projected wide buy/sell margins between weaned calf and feeder cattle prices.
As has been traditionally done with retained ownership of calves, ranchers are projected to continue to subsidize growing feeders with the profits made from producing weaned calves. As done in the past, faulty accounting practices will prevent many beef cow producers from again realizing that they are subsidizing the growing and finishing phases in the emerging biofuel era.