PHOENIX, Ariz. — Agribusiness intelligence sources suggest 2018 could be a good year with some fringes of uncertainty.
There are record amounts of beef, pork and poultry in the United States so retail prices should be stable, said Cattlefax analyst Mike Murphy.
“We got into that extremely tight supplies in 2014 that drove retail prices significantly higher and we had to ration that tight supply. Since then, prices have come down and for the most part in 2017 that price stabilized,” he said.
More meat is expected this year so retail prices should continue stable for 2018.
The value of beef and grain was analyzed at the National Cattlemen’s Beef Association convention held in Phoenix, Jan.30 to Feb. 2.
Increasing supplies of cattle, hogs and poultry should result in greater grain consumption.
U.S. corn has always led the market, but its share of global corn production is shrinking. In 1980, the U.S. provided nearly half the world supply but now accounts for about a third of all production.
“What we do here in the U.S. will have less of an influence in terms of values,” Murphy said.
Exports have weakened and there will be no significant changes in corn, wheat or soybean plantings this spring.
He predicted 91 million acres of corn and 90 million acres of soybeans. He said wheat plantings should come in at about 45.5 million acres.
U.S. corn yield has the potential for 172 bushels per acre but depends on timely moisture this summer.
Feed costs are likely to remain moderate to low but drought is threatening the grain growing areas, said David Williams of Informa Economics.
“Pasture conditions are in question for the spring. We continue to see the drought areas expand.
“We had less rain throughout the wintertime, so it is a big concern,” he said.
Ethanol use could also affect the price and availability of corn, as well as the cost of using dried distillers grains for livestock feed.
Ethanol producers are preparing to ramp up and that will release more wet and DDGs to the market.
Inclusion rates for livestock diets have gone up slightly.
“We have heard as high as 40 percent in cattle feeding and dairy in certain parts of Nebraska,” Williams said.
Despite the outside influences, Informa believes profitability for the beef complex should continue for 2018-19.
“We have some dangers but the party is continuing to move forward,” he said.
The top level for cash prices in 2018 have already happened. Prices should flatten in August and September as a wall of cattle on feed move forward for slaughter.
Cow-calf returns for 2018 are holding but the second half year is less predictable.
Feedlot placement in 2018 will drop off in early spring but peak in May and climb again in November.
Seasonal placement trends are comparable to 2017 but producers may send cattle to market sooner if the drought spreads and worsens.
The first half of 2018 should bode well for the feeding sector, but as the summer dries out, costs could go up and cause losses.
This could slow expansion as profits slip away but if there is no serious drought, growth could continue.
With ample domestic supplies, the U.S. is importing less beef and is focusing on more trade with Japan, Hong Kong, South Korea, Mexico and Canada.
A big change for the domestic beef industry could be the decision of McDonald’s Corp. to switch from imported frozen patties to U.S. product only.
“That will be nationwide so that is going to bring in a whole other demand level for the packers and further processors that make ground beef to be able to supply that on the fresh side,” he said.
There will be a big push on packers to fill the orders with U.S. fresh product and it could affect the price of 90 percent trim.
“Trim is now a bigger component within the beef carcass and could be something that drives the market this year,” he said.
There is also increased demand for more all beef patties, hotdogs and sausages made from fresh meat rather than frozen.
“We have hundreds of thousands of consumers who all want to eat hotdogs all summer. That creates a demand no one can handle all through that time frame,” he said.