Economist says 2015 should be good for beef producers

Cattle prices should remain strong for 2015, after a brief dip during the past two months, according to an LSU AgCenter beef cattle economist.

"Auction barn prices have been down but they've rebounded over the past couple of weeks," said LSU AgCenter economist Ross Pruitt.

Beef supplies remain tight, he said, and that's holding cash prices steady for local beef sales.

For 500-600 pound calves, the price should range from $2.15-$2.45 per pound, he said, compared to the 5-year average of $1.50 per pound.

He said current price forecasts show up to a $2 per pound increase for 500-pound cattle this year, although seasonal price variations could be more of a factor this year than in the past few years when prices did not make the usual decline in the third quarter.

The strength of the U.S. dollar contributed to slower beef exports in late 2014 and may result in lower U.S. beef exports in 2015. As with the past couple of years, current forecasts suggest that 10 percent of U.S. beef production will be exported, despite the strengthening in the U.S. dollar combined with record high prices.

Pruitt said the high beef prices have been driven by a large sell-off in recent years because of drought and lack of profitability. Improved pasture conditions last year allowed producers the ability to expand their herds which further fueled the rise in prices.

A recent U.S. Department of Agriculture report showed a two percent increase in beef cows, a four percent increase in retained beef heifers, and a one percent increase in the U.S. cattle inventory from 2014.

"That caught most analysts off guard," Pruitt said. "The USDA report has altered the longer term outlook for prices, but prices will still be above historic levels for most of the rest of the decade."

Even with the increased U.S. cattle inventory at the beginning of the year, beef supplies will still be tight the next couple of years with retail beef prices staying high as a result, he said.

Forecasts also show chicken and pork prices increasing by at least four percent, he said.

"Exports of pork and chicken account for a fifth of domestic production, so the strength of the U.S. dollar and how it impacts exports of both commodities will bear watching throughout 2015," Pruitt said.

Lower grain prices have helped expansion incentives for beef, pork and chicken producers. It remains to be seen if the U.S. corn crop has a third consecutive year of record production, he said, as corn acreage will likely be lower in 2015.

Even with the decrease, Pruitt said, it's expected that corn prices will remain at or below $4 per bushel because of the large carryover in corn supply.