USDA forecasts the 5-Area steer price for 2014 to average $132 to $140 per hundredweight, up from 2013's record average of $125.89. As fed cattle supplies shrink in 2014, prices should continue to climb. But as retail beef prices rise, the threat of consumer resistance increases. Packer margins are generally weak and any resistance to high beef prices at retail will likely move downstream and limit what packers are willing to offer for cattle.
Related: Beef Herd Recovery: Slow and Steady Wins the Race?
Feedlot margins should improve. But margins will face pressure as feedlot managers are forced to bid up to buy feeder cattle. Those forces will limit flexibility in price negotiations.
Tighter beef supplies will likely push retail prices higher. But price hikes may be smaller compared to the past several years. Retail choice beef prices for 2014 are expected to about 2% to 3% above last year's record $5.29 per pound.
Hogs and Pork
Hog producers generally saw positive returns during much of the second half of 2013. Expectations of lower feed costs had set the stage for a strong expansion. However, the spread of the Porcine Epidemic Diarrhea virus through the U.S. herd will likely pull hog supply below earlier expectations.
PEDV has curtailed pigs per litter. Producers thus far have not dramatically expanded the number of sows farrowing to compensate for the losses in litter size.
Still, enough extra pork is coming to pressure prices. USDA's forecasts the national base, 51% to 52% lean, live equivalent, price average $61 to $65 per cwt. for 2014, down from last year's $64.05. Prices should average above 2013 in the first half of the year as supplies of market ready hogs are tightest. But as second half supplies approach year-earlier levels, prices are likely to drop below 2013 levels.
Retail pork prices for 2014 are expected to average 6% to 7% above below last year's record $3.61 per pound.
Sheep and lambs
The U.S. sheep and lamb inventory declined for an eighth straight year in 2013. The Jan. 1, 2014 inventory of sheep and lambs was 5.21 million head, down just over 2% from 2013. The breeding flock likewise declined 2% and the number of replacements lambs was almost 4% lower. The lamb crop declined over 2% in 2013. In 2013, commercial lamb and mutton production was virtually unchanged from 2012 despite a smaller 2012 lamb crop, as poor forge conditions and high feed costs encouraged producers to market animals in mid-2013.
Production in 2014 is forecast at 150 million pounds, down about 4% as market lambs on January 1 were down over 2% and producers may choose to hold back lambs to rebuild flocks.
The San Angelo Choice slaughter lamb price is forecast to average $157 to $165 per cwt for 2014, a sharp rise from $111.12 in 2013 and possibly eclipsing the 2011's record of $161. Prices began to rise in the second half of 2013 as lighter weight sheep were marketed. Prices are expected to average above year-earlier through 2014 as supplies of marketable lambs remain tight and demand improves.