Blach: Bright outlook for 2014 and beyond

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This year brought record prices for beef, calves and finished cattle, and 2014 promises continued success, particularly for cow-calf producers. That was one of the key messages when Cattle Fax president and CEO Randy Blach addressed a group of veterinarians at a “Prevention Works” conference hosted by Boehringer Ingelheim Vetmedica Inc.

Continued short supplies of cattle, growing international beef demand and a more favorable outlook for input costs all contribute to industry optimism as we head into 2014.

Blach says corn production finally has caught up with the extra demand from ethanol, and Cattle Fax projects corn prices to range from $3.50 to $5.50 per bushel over the next two years. Lower corn prices will bring feedyard cost of gain to much more manageable levels. Corn at $9 per bushel translates to cost of gain around $1.40 per pound, he says, while $5 corn brings cost of gain to around $0.80 and $3 corn reduces the cost to about $0.50 per pound. Lower cost of gain creates more competition for feeder cattle, with a positive effect on calf prices.

Blach also notes the U.S. traditionally has been a major player in global corn trade, accounting for 65 to 70 percent of corn exports. Currently, we account for around 20 percent of corn exports as other countries become more competitive. Looking forward, Blach says we will export more of our corn and soy in the form of animal proteins including meat and dairy products.

Other key points from Blach’s presentation include:

  • U.S. cow and bull slaughter are down 20 percent since August, and down about 3.3 percent year to date. Assuming adequate moisture in key areas, commercial cow slaughter will post further declines of about 8 percent in 2014 and 9 percent in 2015 as herds begin rebuilding.
  • China has dramatically increased its beef imports, primarily from Australia. While U.S. beef remains locked out of the Chinese market, that demand opens up opportunities for U.S. beef in other markets.
  • Heifer retention is likely to increase in the United States over the next few years as producers move into a gradual expansion mode. Cattle Fax expects a year-over-year increase in heifer retention of about 140,000 head in 2014.
  • While the U.S. beef herd has contracted since 1996, dairy-cow numbers have been fairly stable, resulting in a larger percentage of U.S. beef production coming from dairy-breed cattle.
  • In 1997, about 25 percent of U.S. dairies had 500 or more cows. Now dairies of that size account for about 60 percent of the total as the number of small operations declines.
  • Profitability has returned to dairy operations and the trend should continue into 2014.
  • U.S. steer and heifer slaughter will post declines of 300,000, 600,000 and 700,000 head during 2013, 2014 and 2015 respectively due to reductions in the cow herd and more heifers remaining on ranches for breeding purposes.
  • Beef demand will post a 2 to 3 percent increase this year and Cattle Fax expects another small increase in 2014.
  • Prices for 550-pound steers will average around $165 per hundredweight this year and $185 next year.
  • Cow-calf producers will earn average profits of around $280 per head in 2014, with low-cost producers topping that average by $150 or more.
  • Fed cattle will average about $126 per hundredweight this year and $130 in 2014. In spite of high selling prices, cattle feeders have lost an average of $75 per head this year. They recently have shifted to moderate profitability, and profits should continue at least through the first quarter of 2014.


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mr. contrarian    
December, 20, 2013 at 07:32 AM

Wonderful news. But usually when the news gets too far to one side, something comes along and tips the boat over. Don't get me wrong, I hope you're right, but as the name implies, something will happen to turn the tides......

Realist    
December, 23, 2013 at 07:13 AM

Impossible to guess at these numbers. A waist of time. All he does is quote where the futures mkt is . Nice over paid bs.

MikeS.    
Kansas  |  December, 31, 2013 at 07:23 AM

Hold on to your hats cowboys. All these guru's talk about is exports and never address the effects of imports to our market. Below is the reality of what JBS will do to "maximize profits" and harm USA producers. Call me a protectionist but we have the best market in the world and money to buy it! Release No. 0245.13 Contact: USDA Office of Communications (202) 720-4623 Statement from Michael T. Scuse, Under Secretary for Farm and Foreign Agricultural Services of the U.S. Department of Agriculture WASHINGTON, December 18, 2013 – The United States Department of Agriculture and the Brazil Ministry of Agriculture, Livestock and Food made a joint statement today: The United States and Brazil are two of the world's largest agricultural producers and exporters. Over the last 20 years, the U.S. Department of Agriculture (USDA) and Brazil's Ministry of Agriculture, Livestock, and Food Supply (MAPA) have collaborated on many agriculture issues and currently have some 100 agricultural cooperative activities. As global leaders in the use of innovative agricultural production technologies, both countries share a keen interest in exploring further agricultural cooperation. Both Brazil and the United States maintain a strong commitment to science-based rulemaking. USDA and MAPA recently agreed to a path forward to amend rules that currently limit bilateral beef trade. Bilateral trade of all beef and beef products could occur once each exporting country meets the importing country's equivalence and technical requirements for animal health and food safety.


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