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Changing markets may affect cattlemen's profitsBy Jennifer M. Latzke
The changing markets have not only affected those with Wall Street interests, according to Randy Blach, executive vice president of CattleFax. Market fluctuations are also tinkering with cattlemen's bottom lines. Blach spoke at the annual Texas Cattle Feeders Association meeting Nov. 4, in Grapevine, Texas. Blach told members that the markets should recover from their recent free-fall, but that it will be a long and slow recovery period. "We should see growth by the second quarter of 2009," he said. Cattlemen should watch the prices of grains and other inputs as the market moves. It will be more important than ever for producers to watch their break-even costs with the changing markets. "The last two years have been tough years for feeding cattle," he said. "Beef prices have been at record highs." However, fed cattle prices have had to contend with big break-even costs. The cost of production for beef hasn't been passed on to consumers nearly as much as it probably should have, Blach said. With higher corn feed prices, the ethanol crunch and a drawdown in supply, consumers will have to shoulder more of the costs of their beef in the future, he said. Since more people are staying at home for meals, domestic demand for ground beef and end cuts should be stable in the coming months. Blach predicted that slaughter cattle prices should hold at the $90 to $100 range. The market has seen a tighter supply this last half of the year, and the market is just now starting to catch up, he said. The U.S. cattle herd has declined in number, with fewer females being retained. However, beef pounds continue to trend upward. "This year we are on track for the second highest production year," he said. Cattle are getting bigger and so feedlots don't need a lot of cattle to make pounds of product. Also, numbers may drop off due to disruptions from implementation of COOL. "We will have to figure out how to handle those Canadian and Mexican cattle," Blach said. Today 2 to 2.5 million head move into the United States from Canada and Mexico, but with COOL that may not be the case. From an overall supply standpoint, even though beef production will drop by 1 percent in 2009, Blach predicted that there will be an increase in the export supply. As far as U.S. prices for beef on the world market, ranchers have benefited from a devalued dollar. "We've seen tremendous growth in exports," Blach said. "I think that will slow down with the increase in the dollar. It's difficult to rally if there's not a strong economy underneath the dollar." Buying power from our export markets has declined 20 to 30 percent in the last 90 days due to the change in the dollar, he said. "The higher dollar has cut exports by half," Blach said. "We will see a stable growth trend after this dries up and the credit crisis is all over but it won't be overnight." "When the U.S. gets a cold, everyone else gets the flu," he said. It's important to let the market work itself out, he emphasized. In the end, Blach said, access to world markets will be key for cattlemen down the road. "We have 4 percent of the world population in the United States, and we have a population growth of 78 million people per year," Blach said. "In 10 years, there will be 1 billion more meat consumers in the world. We're moving millions from rice and bean diets to protein and vegetable diets. This is a tremendous opportunity for us." He added that U.S. producers have an advantage over other cattlemen because of the size of our cattle herd and available pasture acreage. Jennifer M. Latzke can be reached by phone at 620-227-1807, or by e-mail at jlatzke@hpj.com. 11/17/08 Date: 11/13/08 Advertisement
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