Cattle prices look to hold steady through much of 2019, but trade will have the potential to impact if prices rise or fall, according to analysts at CattleFax.
Each year CattleFax shares outlooks for what could come in the near and even distant future during the Cattle Industry Convention.
On the trade front, CattleFax analysts express that trade disputes and negotiations will continue to play a role in which direction cattle prices go. Keeping trade going with Mexico and Canada through the renegotiated United State-Mexico-Canada Agreement will be critical. Getting on a level playing field with Australia when it comes to beef trade into Japan is a need. The major trade concern is what happens with China. Currently the biggest impact for agriculture has been the tariffs put on soybeans and pork exported from the U.S. to China.
Still, in spite of trade concerns the outlook is promising for cattle producers in 2019. Profitability is expected for cow-calf and stocker producers, along with beef packers. However, the feedlot sector is expected to see some losses in profitability this year.
Here are some of the facts and projections shared by CattleFax:
- Domestic beef, pork and poultry production is slated for 1.8% increase in 2019, resulting in 103.37 billon lb. of animal protein. Beef production should rise 1.6% during this time, accounting for 27.4 billion lb.
- The Choice-Prime percentage moved from 55% in 2007 to 79% this past year. It is projected to reach 80% for this year. This increase in quality has helped improve demand.
- If beef producers didn’t respond to the demand signal to improve carcass quality, fed cattle would be worth $20/cwt less and calf prices would be $50/cwt lower.
- Per capita beef consumption looks to hold around 57 lb. during the next year.
- About 22% of the value of a fed steer is exported. For 2019 it is projected that exports will add $360 in per head value.
- Since 1990, there has been an annual growth of 7.7% for combined exports of beef, pork and poultry.
- Unemployment is hovering around sub-4% and household income has been on the rise for the past five years. This has helped keep the economy going.
- Gross Domestics Product growth is projected for 2-2.5% during 2019.
- There will probably be one or two interest rate hikes of 0.25% during 2019.
- Spot corn futures prices should be above $3.50 if crude oil continues to stay between a $55-80 range.
- Hay production is projected to be up for 2019 because of improved growing conditions. This should result in lower national hay price at approximately $145/ton.
- The cattle industry has been going through continued herd expansion since 2014 with 6.5 million more beef cattle in the past five years. The beef cow herd added 3 million head, there were 2 million more feeder cattle and calves outside feedyards, and 1.5 million cattle on feed.
- The rate of expansion is slowing with 510,000 more beef cows added in 2018. There are 180,000 cows projected to be added in 2019 and another 100,000 cows could be added in 2020. By 2021 the rate of expansion is expected to be flat.
- The dairy industry to cull another 30,000 to 40,000 head because of depressed milk prices, which could impact cull cow prices.
- Fed slaughter has risen since 2015. In 2017, there was a 4.9% increase in fed cattle slaughter with 25.8 million head going through packing plants. An additional 430,000 cattle (1.7% increase) went through packers in 2018 and this year another 300,000 cattle (1.1% increase) should be going through packers.
- Total slaughter, including cull cattle, is anticipated to rise 1.4% with 33.5 million head.
- Carcass weights are expected to be 2 lb. heavier, increasing carcass weights to 817 lb.
For 2019 cattle prices are projected to average:
- Fed Cattle: $117/cwt ($100-130)
- 750 lb. Feeder Steer: $147/cwt ($130-160)
- 550 lb. Steer Calf: $164/cwt ($140-185)
- Utility Cow: $55/cwt ($42-62)
- Bred Cow: $1,550/head ($1,200-1,800)
Closing thoughts from CattleFax CEO Randy Blach:
- “Consumers love what you are providing.”
- Going forward, are will willing to make those changes that consumers want. Whether that is source verified or traceability…we need to respond to consumer demand signals.
- This new group of consumers has higher expectations. Let’s not make the same mistake we made in the 1980s and 1990s.
- Fake meat will become more cost competitive and will gain market share. “We’re not going to stop it.” The production costs are going to get lower. We’ll need to do what we can as an industry to keep it inbounds.
- We think the beef industry will continue to be profitable. The early part of the next decade could see calf prices soften, but cow-calf producers should stay profitable.