Market strength Cattle supply and consumer demand continue market support
Rawlins – “There was an incredible market in 2014, and the run-up was unprecedented,” stated Utah State University Ag Economics Specialist Dillon Feuz at this year’s Wyoming Agricultural Bankers Conference in Rawlins on May 14, referring to the U.S. cattle market.
Adjusted prices compared to relative items, such as the price of a calf related to the price of a standard Ford pickup truck, illustrate the high value of cattle last year.
“I compared 2014 to 1972, which was a very good price year, and 2014 beat that. It also beat the peaks in the late 1990s. This is, historically, a great set of prices,” Feuz explained.
Projecting into 2015, he noted that this year’s cattle market also started off strong.
“We have positives on the demand side and positives in supply in terms of price and cheaper corn that all came together in the fall of 2014, giving us these record high prices,” he continued.
One factor contributing to the market is consumer demand, which has increased over the last five years and is now back to a level near where it was before the recession.
Trends indicate that demand will stay strong as 2015 progresses.
“Looking at wholesale ribeye prices, reflective of the upper-end steak market and looking at what people are willing to pay in restaurants, we can see that 2014 was a very strong year,” Feuz stated.
Quality steak prices also increased over the last year as consumers continued to pay the increased rates.
“When we look at their profitability, restaurants are doing pretty well. That is reflective of consumers being willing to go in and spend more money. That’s positive at that end of the market,” he commented.
Processed beef, such as ground hamburger, has also seen growth in the market, often selling for higher prices than cuts of chicken.
“Consumers are still willing to pay for beef, in all of the different forms that are out there. Demand is strong, and it looks like that is continuing into 2015 for the beef industry,” Feuz said.
Exports also contribute to demand, and the U.S. provides beef to major markets, including Japan, Canada, Mexico and South Korea.
“When we look at these four markets, each of them has different demographics, so it is not likely that any one event is going to affect all of those markets similarly,” Feuz explained.
These export markets continue to grow, and if China allows U.S. beef to be imported, a large market will open up there as well, he said.
“When we look at what we import and what we export on a value basis, we are bringing roughly $3 billion annually into the cattle industry,” he noted.
U.S. herd size
Supply is the other factor affecting the market going into 2015, and the U.S. has historically low calf numbers, which means tight supplies going forward.
“We have to go back to the 1950s to see smaller herd numbers,” commented Feuz.
Feedlots will likely struggle in the coming years as their potential capacity is larger than the number of calves coming in, but prices will stay high for cow/calf producers.
“The feedlot industry is going to continue to have challenges. There is not much alternative use for bunk space,” he noted.
Feuz predicted that it might take a number of years for herd expansion to make an impact on the industry in production and, ultimately, price.
“Short of any major droughts that could derail it, we will see herd growth, but it will likely be fairly slow,” he said.
Prices for calves, slaughter cows and feeder cattle have all started off strong for 2015.
“Average prices for 2015 will probably be a little bit higher than 2014. Projections are that we might start tracking below 2014 prices during the summer, dropping below last year’s levels late in the third quarter and early in the fourth quarter,” he stated.
Overall, he predicted that prices will stay high, and considering the records set last year, even lower prices will still be strong.
“Longer term I think we still have at least two or three more good years in the industry,” Feuz said.
Natasha Wheeler is editor of the Wyoming Livestock Roundup and can be contacted at email@example.com.