After a record setting 2014, where do U.S. livestock markets go from here? Lists of the factors likely to shape livestock markets have appeared in recent weeks to help answer that question.

Many of the factors including drought, demand, exports/imports, and expansion have impacted the markets in recent years and are a safe bet to impact 2015 against a backdrop of tight beef supplies continuing through next year. Increased pork and poultry production will also impact beef markets in 2015 and could be a key difference between 2014 and 2015 with at least one other surprise not included on the end of the year lists to pop up before end of next year. Will 2015 be exactly like 2014? No, but many of the lessons learned in 2014 may be relevant again in 2015.

From a total market perspective, seasonality can temporarily be suspended as has been the case in the past few years. Calf, feeder cattle, and slaughter prices all were able to ignore seasonal trends and reach peaks in the 4th quarter this year. There has been some disappointment in leaving money on the table the past couple of years with selling too early, but these have been atypical years and, eventually, the market will return to the norm of lower prices in the 4th quarter.

There was plenty of uncertainty during 2014 including the extent of the PEDv in the U.S. hog sector, how quickly would poultry production expand, how fast consumers would see higher red meat and poultry prices, and what would happen as those prices rose. Some of these questions remained unanswered as 2015 approaches. However, meat and poultry demand has stayed strong even as consumers saw record high retail prices throughout 2014. Consumer preferences are slow to change and lower oil prices may free up extra food budget dollars to provide further support demand in 2015 as higher prices continue to be passed on to consumers.

While the above lessons are focused more on the market, maybe you learned something specific to your operation that can be replicated in future years. These lessons may be management-oriented where the cost was the learning process itself and carries no additional cost of implementation in future years. This is not always the case as it could be a specific practice that has an annual cost to implement. If this is the case, knowing how and how much production benefitted is then important to understand how additional revenue was impacted. Does the general price level of cattle impact whether or not this practice is continued? The underlying question is if the additional cost is at least equal to the benefit of using a practice. What is beneficial now and likely to continue to be so in 2015, may not be the case in future years.

As 2014 closes, there are many things to look forward in 2015. Pork and poultry production are already showing signs of ramping up, a year behind what was expected. This highlights the fact that expansion of any U.S. livestock or poultry sector takes longer than expected. With U.S. beef production expected to fall below 24 billion pounds in 2015, the lowest since 1993, prices will be strong through the end of the


decade. New records may not be set consistently in 2015 as occurred in 2014, but lessons from this year will be beneficial in navigating 2015. There will be challenges, but lessons from this year and the recent past should help make next year another stellar year.

December USDA NASS Cattle on Feed Report summary:                Pre-Report Estimates

                                                     1,000 head                % of Prior Year                         Avg.                       Range

Placed in November                  1,792                                   96.0                                  96.1                 93.5 – 101.8           

Marketed in November           1,475                                   88.9                                  89.9                  88.5 – 93.7

On Feed December 1              10,876                                 101.4                               101.1               100.0 – 102.4

 

The final Cattle on Feed report of 2014 didn’t contain any surprises relative to the pre-report estimates. Total inventories are larger than a year ago for the second consecutive month, partially reflecting seasonal trends for the total number on feed to grow in the 4th quarter. Nebraska was the only major feeding state to see an increase in November placements relative to last year due to increased placements of cattle weighing at least 700 pounds. Placements of cattle weighing at least 700 pounds were up 3% compared to a decline of 9% relative to a year ago for cattle weighing less than 700 pounds. There was one fewer working day in November compared to a year ago. When accounting for this difference, marketings were only 6.5% lower than a year ago and placements were 1% higher.

Corn futures were slightly higher on the week due to good demand. Export sales continue to be favorable for the corn market and investors continue to be bullish on corn. Ethanol production set a new record last week providing additional support.

Live cattle futures were mostly lower as they were pulled lower by feeder cattle futures. The decline in cattle futures also spilled over into the hog complex during the week. Wholesale beef prices were lower during the week providing some pressure as well due to most of the holiday purchases being wrapped up and concern focused on post-holiday demand. Feeder cattle futures endured five straight days of limit down trading dating back to late last week. The Chicago Mercantile Exchange expanded daily trading limits on Thursday and feeder futures were able to pull out of their nosedive at that point. Feeding margins that are in the red contributed to the decline even though cash feeder cattle sales are still at a premium to futures. Whether or not a floor for this market has been established remains to be seen, but the expanded daily limits helped some of the deferred contracts recover some of what was lost in the first half of the week.

Cash fed cattle trade was extremely limited on the week. Sales in Kansas went for $156/cwt to $157/cwt on Wednesday, about $7/cwt to $8/cwt lower than week. A few sales on moderate demand in Colorado and Nebraska on Friday brought $160/cwt, the low end of trading last week.

*Prices are for Medium and Large 1-2 Steers
**Mississippi prices are for midpoint of 500-600 and 700-800 steers
Note zero values in table represent no reported sales for that weight group.
Source: USDA AMS

 

Source: USDA AMS

 

 

 

 

 

 

Table 1.  Futures Prices

 

Live

 

Feeder

 

 

 

Month

Cattle

Change*

Cattle

Change*

Corn

Change*

December

 $      160.75

-1.30

 

 

 

 

January

 

 

 $     220.15

-5.45

 

 

February

 $      160.10

-2.08

 

 

 

 

March

 

 

 $     217.98

-3.28

410 1/2

3   

April

 $      159.68

-1.72

 $     218.08

-3.03

 

 

May

 

 

 $     218.60

-2.83

419   

3 1/4

June

 $      152.50

-1.58

 

 

 

 

July

 

 

 

 

426   

4 1/2

August

 $      150.80

-0.15

 $     219.60

-1.63

 

 

September

 

 

 $     219.60

-1.53

428 1/4

3 1/2

October

 $      152.25

0.15

 $     218.75

-2.35

 

 

November

 

 

 $     216.98

-4.53

 

 

December

 $      153.28

0.93

 

 

435   

3 1/4

Source: DTN
* Change is from the previous Friday’s close

Table 2.  State and National Market Information Source: USDA Agricultural Marketing Service, USDA National Agricultural Statistics Service and Livestock Marketing Information Center
1 Note the placements numbers are lagged by one week prior to publishing.