So where does beef go in 2013? Well, you can see what big money will do to push up cattle prices. But the fundamentals do not look very good for live cattle. First the U.S. herd numbers are at very low numbers. Last count 97.8 million head. Over the past few years we have seen cattle producers go through a major breeding stock and culling cycle. The drought in 2011 in Texas and the southern plains helped reduce calf and feeder cattle supply.
Then we saw the worst drought in 25-years send grain prices to record highs and the lack of available grazing lands because of the drought continued producer liquidation. By the fourth quarter, 2012 beef production was down by 3.5% from the previous year.
One item that helped keep prices down was the weights were at record highs, however expectations are for possible drops in weights, which would be bullish. Historically between 1Q and 2Q beef production increases by 300-400 million pounds, expectations for 2013 are for an increase of 140-million pounds and it could be less.
Another bullish sign for 2013 is that the USA is expected to be a net importer of meat. As world beef demand increases and supplies drop, we could see a very bullish 2013 for Live Cattle. If recognized, we could see price action in 2013 between $135-$150. Make sure you watch big money as they will signal the next run up, like in all commodity markets.
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