Smaller breeding herds mean that calf production in the U.S. has declined for 16 straight years to the lowest since 1950, the University of Missouri’s Plain said. That could mean the highest prices ever, said Plain, who has studied the industry for three decades.
Plain’s forecast of $1.33 is for February futures on the CME. The previous all-time high for a most-active contract is $1.315, reached on Feb. 22. Cattle for August delivery, currently the most-active contract, traded today at $1.20775.
Beef output will fall 2.5 percent to 24.661 billion pounds (11.19 million metric tons) next year, the lowest since 1993, the USDA said in a May report. The department will update its forecast at 8:30 a.m. in Washington.
Shrinking supply may not be enough to keep prices rising because the outlook for demand is “pretty ominous,” said David Kruse, the president of CommStock Investments Inc., a broker in Royal, Iowa, who has studied the markets since the 1970s. Slowing growth from Europe to China and concern that the U.S. economy may falter will hurt the cattle market, he said.
JPMorgan Chase & Co. in New York lowered its forecast for third-quarter economic growth in the U.S. to 2 percent from 3 percent after the government said June 1 that employers in May added the fewest workers in a year. Expansion in China will slow to 7.9 percent in the second quarter from 8.1 percent in the first quarter, according to the median of 21 economist estimates compiled by Bloomberg.
U.S. beef consumption is forecast by the USDA at 11.359 million tons, the lowest since 1993, partly as people eat more pork. Wholesale-beef prices reached an eight-month low in April. Consumers curbed purchases and some retailers stopped selling products containing lean, finely textured beef dubbed “pink slime” by food activists because it was made from beef trimmings and treated with ammonia hydroxide to kill pathogens.
Cattle futures plunged by the exchange limit on April 24, when the U.S. reported its first case of mad cow disease since 2006. Prices have since rebounded 8.2 percent on signs that the case was isolated and importers didn’t halt purchases like they did in 2003, when the first case of bovine spongiform encephalopathy, or BSE, was found in a Washington state cow. The following year, U.S. beef exports plunged 82 percent.