UIUC Weekly Outlook: Cattle Producers Show Interest in Expansion

Hurt says there are mixed signals for that region. Rainfall for much of the southern Plains has been above normal for the past couple of months. However, the National Oceanic and Atmospheric Administration (NOAA) continues to forecast that drought conditions will persist through at least the spring for that area, and that drought will continue, or develop, for much of the southern tier of states from California to Florida, he said.

"The second condition is to wait for an assurance that the 2012 U.S. crops will have favorable yields. This is because NOAA is forecasting that a region of the western Corn Belt will continue to be very dry into the spring, which raises concerns for corn and soybean meal prices. Higher feed prices would tend to depress calf prices," he said.

The first signs of expansion do little to change the bullish cattle price forecasts, he added. "Look for finished cattle prices to push into the higher $120s this spring, the moderate to mid-$120s this summer, and finish the year near $130. Spring highs in 2013 could climb to the low $130s."