Industry outlooks important to consider in marketing plans for 2017-18

“The demand side of the world is driven by consumers,” said Livestock Marketing Information Center Director and Senior Agricultural Economist James Robb. “It does filter down, and the demand for meat eventually becomes the demand for cattle, especially fed cattle, then feeder cattle, then breeding stock.”

At the end of July in a National Cattlemen’s Beef Association Cattlemen’s webinar, Robb discussed the current market outlook for beef producers to consider for their marketing plans.

Demand

When looking at how to assess demand, Robb explained it cannot be determined by per capita consumption alone.

“Per capita consumption is largely what we have available in the marketplace, but it does not really tell us anything about the price of the product,” he said.

Robb continued, “Demand is much more complicated. If we look at demand, it also has this price dimension, and we often look at that as an index.”

When looking at the index of the last quarter, Robb noted demand is better than it has been for most of the last 10 years.

According to Robb, there is a large gap between consumer demand and demand for cattle currently.

“We have a lot of retailers selling beef as a loss leader. They’re very concerned about using it to get people into their stores,” he stated.

The demand profile is still in the top three of the last 10 years, he noted.

  “This is a good demand profile at the consumer level, but again, it does not tell the whole story, and we’ve seen that recently, with very good demand for slaughter cattle, even better than the demand for beef at the retail case,” Robb commented.

Exports and imports

“The export markets are a key component of demand for U.S. products,” said Robb. “Beef exports have been very good, and that is certainly part of the reason we’ve had a very strong cattle market, no two ways about it.”

He noted that a decline in exports in 2015, while it looked insignificant, accounted for a loss of $1.5 billion for the beef industry.

“That $1.5 billion has come back into the marketplace in 2016 and has continued to grow here in 2017. This year’s growth has really helped mitigate the decline in cattle prices compared to what would have been the case otherwise,” Robb commented.

Looking ahead at 2018, Robb predicts, “We’ll have actually eclipsed the best year ever in terms of beef export tonnage.”

Beef imports to the U.S. are another component that impact demand, with imports typically consisting of different products than those which are exported.

“We expect the amount of product imported from Brazil to go down,” Robb continued. “The net trade position has actually been a very positive force compared to 2015 and the cattle market we had 2015-16.”

Competing meats

When looking at competing meats, Robb commented that there has been an increase in broiler production in 2016-17.

“The big surge in broiler production in the United States will continue to grow in our forecast but not at a level near the big jump up that we had with the five-year average of 2011-15,” he said.

On the pork production side, there has been more growth than in poultry, explained Robb.

“Importantly, the pork industry is essentially year-to-date exporting all of their increase in domestic production,” Robb commented. “The beef industry has not been able to do that, and the chicken industry has been well behind the curve and not able to do that either.”

With growing production, the biggest concern is the amount of tonnage the market must absorb.

“If population and export growth work in our favor, it helps mitigate it, but clearly, we are in for a couple more years where total red meat and poultry production in the United States will continue to ramp up,” Robb continued.

Drivers

One of the many marketplace drivers for producer decision-making is cattle prices, said Robb.

“We expect cattle prices to be above a year ago for calves – not a lot, but a little. We expect the same for seven to eight weight steers,” he commented.

While there is always risk in the marketplace, particularly on the fed cattle side, Robb noted the U.S. has had the best six consecutive months in cattle feeding in the history of the United States industry.

“The cattle feeding sector has really turned the corner, and that’s been supportive of calf and yearling prices,” he stated.

Robb explained it is also important to note the industry is “swimming upstream.”

“In other words, this year’s calf crop is bigger than last year, mirroring the trend from 2014 to now,” he said.

As producers find themselves swimming upstream, they will have to plan differently.

“Marketing calves upstream means that I have to be much nimbler,” Robb concluded. “If I have to go to the video auctions this year and I get a bid, I don’t necessarily want to pass on the bid.”

Emilee Gibb is editor of Wyoming Livestock Roundup and can be reached at emilee@wylr.net.