Current U.S. protein markets show positive market trends across the industryWritten by Natasha Wheeler
Fort Collins, Colo. –At the International Livestock Forum on Jan. 13, CattleFax CEO Randy Blach presented an overview of current U.S. protein markets.
“In my career, I have never seen all of the segments get along as well as they are now,” he said.
Recently, pork, poultry, dairy and beef have all been successful in prices and profitability. Livestock demand has been up, and supplies have been down.
U.S. markets are currently consuming approximately 220 pounds of beef, pork and poultry per head on an annual basis.
“Our forecast for pork is a four to five percent increase, and hog slaughter will increase,” Blach noted. “We expect to see poultry up four or five percent in overall production, as well.”
Although the dairy industry has struggled recently, 2014 showed much better returns, and record beef prices have already triggered growth in production supply to meet market demands.
“Even though we have had some issues with Porcine Epidemic Diarrhea Virus (PEDV), we still had incredible margins for pork producers,” stated Blach.
Experts are optimistic that the worst of PEDV is over and that pork production will continue to grow.
“In the early 1990s to the mid-2000s, pork production was growing at a rate of two percent per year,” he stated.
There was a flat-line in production following that due to high corn prices, but Blach is optimistic that future production is on the rise. He also had positive predictions for poultry.
“From 1980 to 2005, average poultry output in the U.S. increased 4.5 percent per year,” he continued.
Over a span of 40 years, there have only been a few downturns and small year-to-year decreases. Grain prices also effected poultry production, but trends are again beginning to increase.
Demand for beef continues to power the cattle market.
“There has basically been no growth in beef output over the last several years,” stated Blach.
The industry segment will have to respond to the markets. Cow numbers and beef output are predicted to be on the rise.
“From 1980 to 2000, the average cow/calf profitability of this industry was $2.04 per head,” he stated.
Profits from 2014 exceeded returns from the previous 20 years combined.
“Beef retail prices have gone up 20 percent in the last 18 months,” he added.
Medium and large operations are showing growth and producers who downsized in previous years are beginning to restock their herds.
Corn prices are directly correlated with livestock production rates. In the last year, grain prices have stabilized somewhat allowing for positive trends in livestock.
“We needed to have a more reliable supply of grain,” stated Blach.
He added that corn prices spiking to seven and eight dollars a bushel did not bode well for production.
“We couldn’t respond to the economic signal to grow our output in most of the protein markets because the economics just wouldn’t justify it,” he said.
Expansive drought throughout the U.S. was one driver of grain prices. Almost the entire country experienced below-average rainfall two years ago.
“We couldn’t grow enough corn or grain,” he commented.
The corn ethanol mandate also affected the market.
“That basically created a demand overnight for an additional 4 billion to 5 billion bushels worth of corn on an annual basis,” he explained.
Corn supplies were not large enough to meet the needs for production, meaning prices increased.
“The market had to move up high enough to attract the acreage,” Blach stated.
Corn production rose from 9 billion bushels to 14 billion bushels a year.
“The markets work,” he said. “That is why the industry went through a stagnant period.”
Blach reminded producers that economics are functional. Markets have been dynamic, and the impacts have been significant. Record prices will not be sustainable indefinitely, but but there will continue to be demand for pork, poultry, dairy and beef, he said.
“Agriculture is the right place to be. There are some incredible opportunities that we have in this business as we go down the road,” he said.