As the nation’s cattle inventory continues its expansion, consumer demand is increasing at a steady clip, according to experts speaking at the Texas and Southwestern Cattle Raisers Association Convention in Fort Worth.
For Texas producers, the year is off to a good start with above-average rainfall and green forage on pastures for grazing.
“We are wet,” said Randy Blach, chief executive officer of CattleFax, looking at a U.S. drought map during his CattleFax beef outlook presentation. “There’s not much red on the map.”
Blach said the El Nino pattern is expected to continue after the second wettest winter since 1980 for the cattle-feeding industry.
“Weights are a bit lower and prices are reflecting this.”
Expansion continues for the nation’s beef cattle producers. Since the mid-1970s, the U.S. beef inventory has grown to about 132 million cattle.
“We are 40 million head off our peak,” Blach said. “We’ve added about 3 million beef cows, but the whole cattle pipeline got much fuller. Our capacity has been pretty much reached throughout the industry. You are likely as producers to lose a bit of leverage to stocker operators and cattle feeders because we’ve got so much more cattle in our pipeline. “
The bottom line, he said, is the industry is still expanding. “It takes green grass and profitability to grow the nation’s cow herd. We are still expanding, but at a very slow rate with no new (processing) plants coming online anytime soon.”
Dr. Joe Paschal, Texas A&M AgriLife Extension Service livestock specialist at Corpus Christi, said cattle prices are top of mind for most, especially cull cow prices.
Paschal said cattle producers in South Texas were positive after the recent STX Beef Co. acquisition of Kane Beef processing plant in Corpus Christi.
“Almost everyone knows how important that plant is to the cow business around there, whether you feed cattle or not,” Paschal said. “Lack of hay and too much moisture concerned a lot of folks up the coast. They got plenty of rain late summer and fall and had little or no hay to winter on. The next thing is what will be going on long-term in the cattle market since the gurus think the herd is beginning to stabilize. Beef production will continue to increase for at least two more years, and what effect will that have on price?”
Looking ahead to the cattle market prices, Blach said spot corn futures prices are $3.75/bushel to $4/bushel. He said with spring coming later this year, that will mean more cattle turned out later for grazing, which will mean more cattle brought to market late in the year. That will be reflected in prices going into the fall, he added.
“I think the lows come later this year based on how many cattle will be coming into the yards,” he said.
For cow-calf producers, Blach said there has been a good run with prices this year, but they are not going to be as good as 2014. The average per-head profitability for cow-calf producers is $100-150, he said.
“I don’t see a lot of new plants going on line,” he said. “If so, it will be at least two years before it would be harvesting any more cattle. The economy remains strong. The Federal Reserve said two weeks ago they wouldn’t raise interest rates. If we move back into more of a recession environment by 2020-2021, it will give us some vulnerability.”
Blach said this is not the stage of cattle cycle to take any significant risk with record pork and poultry production along with beef.
“We are producing 65 billion more pounds than we were in 1965,” he said.