I’m not good at making predictions about most things (even though it was easy to predict the Chiefs would have a crummy season), so I turned to my colleagues to ask them where they believe our ups and downs in the beef and dairy markets will be in 2010.
Cutting costs will factor in dairy
Tom Quaife, editor of Dairy Herd Management, says next year’s all-milk price could be around $16.70. He adds that next summer, we might see the all-milk price approach $19 for a brief period of time before retreating again. While the improvement is welcome, there is some question whether we will see a return to profitability, since the break-even cost for many producers is around $16 to $17 per hundredweight, Quaife says. “It looks like we will flirt with break-even prices for much of the year.” Obviously, producers who can keep their costs down will have a better chance to be profitable.
Cow numbers should continue to decline. In October, there were 9.038 million cows in the national dairy herd — down considerably from the 9.324 million figure posted a year earlier. “Many in the industry think that we need to get the number down to 8.9 million in order to be profitable,” Quaife notes. “Surviving 2010 will be like trying to go under a ‘limbo stick’ — the bar will be set fairly low, but some might be able to squeeze under.”
There will be no easing up as far as spending money goes, so help your clients maintain their cost-cutting, but make sure they don’t do it at the expense of animal health and production. You will be a key factor in how they run their business in the coming years.
Beef industry limps along
2008–2009 were tough on cattle feeders, but most cow-calf producers should have remained profitable because prices remained relatively strong, says Drovers editor and associate publisher Greg Henderson. Looking ahead, prices for feeder cattle and calves should remain at current levels or above. Supplies of calves and feeders are tight, which suggests higher prices next year. Significant rallies for calves and feeders will be tied to cash fed cattle prices which are tied to supplies, corn prices, exports and domestic demand.
Henderson adds that fed supplies will increase because we have placed significantly more cattle on feed in each of the past four months. Corn prices remain relatively high and have increased during harvest; feeders either need to pay less for cattle, or sell fed cattle at higher prices.
A boost in U.S. exports could tack several dollars on the fed price quickly. Analysts believe if domestic demand returned to the pre-market crash levels, cash fed cattle would be selling for $93 to $94, rather than $83 to $84.
Fourth quarter 2009 domestic demand is on pace to be down 9% compared to 2008. Analysts say continued high unemployment and increased savings rates will likely keep pressure on demand into next year. “The recent rise in the hide and offal value is giving a boost to packer margins. But at this time, supply, demand and seasonality all suggest fed prices may slide back to $80-81 in the first quarter of 2010,” Henderson says.
Encouraging producers to use practices that will increase pounds on calves such as pre-conditioning, deworming and even genetic modification will continue to be key. Watching BQA principles, including branding location, may also help increase the value of things like hides which are currently on the upswing.
Beef and dairy veterinarians are an integral part cattle production — help your producers make the most of this new year.