As a part of the new year top ten lists, Dr. Darrell Mark, Associate Professor of Ag Economics at the University of Nebraska, shared his thoughts in the recent In The Cattle Markets newsletter. Here are his thoughts. Please share your comments with us.
10. Heavier carcass weights. Cattle dressed weights have increased in the last twenty-five years, so the 1.4% decline in 2010 was unusual. The harsh 2009-10 winter dropped weights at the beginning of 2010 and feeders kept marketings current throughout the year. Expectations for higher corn prices in 2011, over capacity in the cattle feeding sector, a shrinking supply of feeder cattle, the need to maintain feedyard inventories, and a possible shift back to placing yearlings could all impact carcass weights.
9. Value-based marketing. Consumer demand for traceability, transparency, and other information about the food they purchase has lead to the development of several programs designed to meet these needs. This is especially evident for foreign customers who have age, source, hormone, or other requirements associated with the U.S. beef they import.
8. Animal rights. Communication efforts through social media outlets, mainstream media, and face-to-face discussions about the steps producers and processors routinely take to protect the well being of their animals should have a positive impact on consumers in the new year.
7. More hedging. Most of the cattle placed for the first five months of 2011 could have been hedged at $20-40 per head profits, and current margins suggest profits between $10 and $50 per head can still be hedged through the end of 2011.
6. Growing poultry production. Growing poultry production, when combined with various poultry trade issues, indicates U.S. consumers will have plentiful supplies of poultry which may pressure beef demand.
5. High cattle prices. The constantly decreasing cattle inventory and lower supplies of feeder cattle and fed cattle, should result in the highest-ever annual fed cattle price. The 5-area fed cattle price is forecasted to average close to $100/cwt. Current feeder cattle futures prices suggest cash feeder prices could average $15-20/cwt higher in 2011.
4. Export growth. The U.S. has regained 93% of its 2003 level of beef exports, and they are expected to continue to grow in 2011. World demand for protein should continue increasing as economic conditions improve, consumer disposable incomes increase around the globe, and currency values in Asia find support.
3. GIPSA regulations. In 2011, we will either see industry and government debate on the rule itself continue or discussion of how to practically adapt marketing and production methods to comply with the rule emerge – or possibly both.
2. Higher & more volatile feed grain prices. The stocks-to-use ratio for the 2010-11 corn marketing year is projected at 6.2% , the second tightest ratio in modern history. Wet and dry distillers grain prices have risen about $30/ton and $80/ton, and other feedstuffs like soybean hulls have almost doubled in price. The corn market will be highly volatile through the growing season, however it is still possible to earn a small profit despite costs of gain near $90/cwt.
1. Shrinking cattle herd forcing structural changes. Cattle numbers have decreased, culminating in the smallest national herd in the past sixty years, which will have a profound long-run impact on the structure of the cattle industry itself. The likelihood of having fewer cow-calf producers, cattle feeders, and beef packing plants continues to grow as cattle numbers are set to decline for at least the next couple of years.
For more details on his thoughts, see the LMIC link . And please share your comments on this top ten list by hitting the Leave a Comment button above!
Economics & Markets, Uncategorized
market outlook
