U.S. cattle market booming, but storm clouds looming

PHOENIX, Ariz. — The U.S. beef industry has turned in a stellar performance for the last several years with record profits across all the segments.

“It has been a great run,” said Kevin Good of the U.S. market analysis firm Cattlefax.

“All segments of our industry have been very profitable, a rare time in our history.”

The number of cattle continues to go up, beef production is increasing to a record level of 27.2 billion pounds this year and demand is strong as more Americans see household income improving with extra money to spend.

The U.S. Department of Agriculture’s cattle inventory, which was released Jan. 31, reported that the national herd is at 94.4 million head, a one percent increase over last year. The breakdown shows 41.1 million beef cows, 9.4 million dairy cows and 2.5 million bulls.

There are 14 million cattle on feed, up seven percent from last year this time.

However there are some clouds on the horizon, analysts said during their presentation at the National Cattlemen’s Beef Association convention, which was held in Phoenix Jan. 31-Feb. 2.

Competing proteins such as pork and poultry are also surging, which means a record 102 billion lb. of meat could be on the market this year.

There were 96.4 billion lb. of meat in 2016, which could increase to 104.1 billion lb. by 2019.

The U.S. has become export dependent. Trade accounts for $330 to $340 per animal, and customers outside the country are relied upon to take the extra supply.

Randy Blach, chief executive officer of Cattlefax, said Americans may have to eat an extra 44 lb. of meat a year if the U.S. backs away from trade deals.

Domestically, problems could arise this spring and summer because severe drought that is already drying out California and Arizona could spread across agricultural regions.

Producers need to be cautious. The market will probably plateau in the next 12 to 18 months, considering weather and a growing mountain of meat.

“We would suggest as we go through 2018 that expansion will stop,” he said. “We know there is a lot of profitability within the industry with calf prices where they are at. That would suggest continued expansion for the next couple of years, but nonetheless we have to be cautious.”

Good forecasts live prices will be strong for 2018.

Fed cattle should range from $100 to $130 per hundredweight to average $115 per cwt. Feeders in the 750 lb. weight range should go for $135 to $160 per cwt. and average $158 per cwt. Calves in the 550 lb. weight class should range from $135 to $180 per cwt. and average $158. Utility cows will average $60 with a range of $50 to $70 per cwt. Bred cow values will be around $1,400 to $1,600 each.

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