Can Only Hope

Finishing with what we wrote about last week on what we hope the price of calves and yearlings will be this summer and into the fall, we can only hope for the best, but that is what we do almost every year. This year seems to be a little fragile, though.

I guess the expansion in beef cows, the number of calves for sale and cattle on feed as the summer goes on will tell the story, along with the price of feed, especially corn, and what the weather does especially in the Corn Belt and also in South America. So again we are rolling about five dice, maybe more.

The story from The Progressive Farmer written by Vitoria G. Myers, with quotes from Purdue Agricultural Economist Chris Hurt, paints a pretty good picture.

Hurt talks a lot about the shortened expansion cycle, and I think it proves true. Remember, my predictions usually don’t hold true for any further than the bunkhouse, but they are free and are supposed to just give you something to think about to form your own predictions.

There is some positive outlook in the cattle industry, and most of it is based on the shortened cattle expansion. We have been in an expansion phase for the last 24 months. USDA reports the Southern Plains increased beef cow numbers by nine percent. The Central Plains and both the eastern and western Corn Belts by five percent, the Southeast and the Northern Plains increased by one percent. This growth bumped up 500 pound feeder steer and heifers not retained for breeding supplies by four percent. This number may not sound like a lot, but four percent of the total feeder numbers adds up.

Those in the know say the biggest challenges the beef industry we’ll likely see this year, in terms of the market, will be focused on the feedlot side. Price fluctuations and market risks for finished cattle could be extreme, depending on the 2016 crop season progresses.

Hurt says, “I am concerned about the size of our crops. We’ve had two near-record years in terms of yield for corn and soybeans, and no one knows yet how this year will work out. We are looking at the lowest prices in nine years on corn and soy meal. Our feed grain markets are set up as though everything will stay cheap, and that can lead to surprises. But, our feeders are used to this, and they have no doubt locked in these low prices. They know how to manage price risks, and these are big price risks.”

The positives are out there, though. As the price of beef lowers at the meat counter, Americans should eat more beef and keep backing the beef checkoff. Also, as U.S. beef producers are turning out more product, around a billion pounds more than in 2015, the export market for beef takes on a new level of importance as prices look for a balance between supply and demand. Global beef production is also expected to rise. Some analysts have suggested another reduction in export sales may not take place, and marginal improvement is even possible. We hope they are right.

To get the best predictions and right information, head to Laramie for the 2016 Wyoming Cattle Industry Convention and Trade Show June 1-4. If the predictions don’t hold up, at least you will have had some great fun.