CattleFax Says Market Shock Is Nearly Over

CattleFax Says Market Shock Is Nearly Over

Recent price shock in the market and insights about the turbulence ahead were the focus of the CattleFax Outlook Session on Thursday at the 2016 Cattle Industry Convention & NCBA Trade Show. More than 3,000 attendees were on hand to hear CattleFax CEO Randy Blach say he believes the market correction is mostly behind the cattle industry. He explained how tight global protein supplies and a strong export market in 2014 and 2015 led to the ‘perfect storm’ of market peaks and the significant drops seen in recent extremes.

“We are coming off of historic peaks in the cattle market, created by unique conditions in the global beef and protein markets,” said Blach. “Dynamics, specifically global beef supply, led to a large correction in price. That big market downward swing is nearly over now. However, the cycle shows prices continuing to trend lower in 2016, 2017, and 2018.”

Analysts predicted cattle feeders will see average losses near $200 per head, stocker operators will experience tight margins and the cow-calf sector can expect profitable margins. The team of economists expect fed cattle prices to average $130-145 in 2016. “The cow-calf margins will still be profitable, but substantially lower than in the past tow years,” said Kevin Good, Senior Analyst and Fed Cattle Market Specialist at CattleFax. “We predict the cattle feeder will have tight margins for the year overall with potential for profit mid-year.”

A two-year El-Nino weather pattern has replenished moisture conditions across the country, specifically the West coast, which saw some relief in 2015. The weather outlook appears favorable, especially for moisture conditions across the grasslands, according to Art Douglas, Ph.D., Professor Emeritus at Creighton University. “As we head into 2016, a split jet stream pattern will favor above normal precipitation from California to the southern Plains and the Southeast through March,” said Douglas. “In the Corn Belt, spring will be wetter-than-normal which will be accompanies by slower spring warming. Delays in fieldwork and planting dates are likely to result.”

CattleFax experts project $294 in added value per head due to exports in the year ahead, a $66 per head decline from 2014 values. This decrease in export potential is caused by a combination of a strong U.S. dollar, slowdown in global market and challenges with market access. Russia and China are still the biggest opportunities for U.S. beef but trade restrictions will continue to limit potential in the year ahead.

Beef imports are predicted to be down 8 percent due to an anticipated increase in domestic cow slaughter. Australian imports will decline due to the start of an expansion phase triggered by improvements in moisture conditions there. In the United States, CattleFax analysts expect to see herd growth moderate, with an increase of just 600,000 head added in 2016. That pace is slower than 2015, when producers added 1.1 million head of beef, but trade restrictions will continue to limit potential in the year ahead.

To learn more from the CattleFax Outlook Session or become a member, visit www.cattlefax.com.

Originally published by NCBA-Convention Edition.