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CattleFax Outlook at NCBA Cattle Industry Convention prepares producers for 2014

By Stuart Estes

Cattle producers heard from experts at the 2014 CattleFax U.S. and Global Protein and Grain Outlook Seminar at the National Cattlemen’s Beef Association Cattle Industry Convention about a host of factors that will affect the cattle industry over the next year, ranging from weather to grain prices to global markets.

Randy Blach, chief executive officer for CattleFax, opened the session with a brief overview of the industry over the past year. CattleFax is a member-owned information organization serving producers in all segments of the cattle business.

“We were talking about drought, record high grain prices,” said Blach about the past year in the cattle industry.

Blach noted an expected decrease in the consumption of beef similar to what has been seen historically in the past 30 years.

“We’ll see another 2.5 pound-reduction in the amount of beef people eat,” Blach said.

But Blach reminded attendees about the importance of the market mechanism in the cattle industry.

“Don’t ever underestimate the efficiency of these markets,” Blach said. “We’ve continued to move to higher trading ranges.”

Art Douglas, professor emeritus at Creighton University, Omaha, Neb., presented the weather forecast for 2014, which included signs of an upcoming El Niño and improved drought conditions across much of the U.S.

“Modelwise we know that El Niño is coming,” said Douglas, noting that El Niño conditions in the summer will likely bring improved growing conditions for the Midwest.

Douglas forecasted relief from the drought that effected the U.S. from 2010-2013. The cyclical nature of droughts would bring better conditions as the cycle moves back into a less severe stage.

Temperatures in the Southeast and West would be above normal and slightly below normal for the Midwest, according to Douglas.

Brett Stuart, CattleFax consultant, spoke to producers about the global protein outlook for 2014, which focused heavily on the demand for beef in China.

“Beef has become a consumer item in China,” said Stuart, likening the demand for beef to the demand for other luxury items like cellphones.

Stuart stressed the demand for beef in China is a demand that would not disappear quickly.

“This demand is real demand,” Stuart said. “It’s not going away.”

The demand for beef in China is part of a rapidly growing, diverse, complex protein market.

“We are talking about tight supply, increased demand in China and a middle class that will double in the next six years,” Stuart said.

According to Stuart, a few key items to watch in the global protein market are Chinese policies for importing U.S. beef, the U.S. cowherd expansion and tightening supplies as well as an expected expansion in the U.S. broiler industry.

Mike Murphy, CattleFax market analyst and risk management specialist, delivered the outlook on grain and energy.

“I think we all feel a sense of relief from having a stable supply of corn,” said Murphy, noting the industry could see increases in corn usage because of the returned balance in the corn market.

Murphy also noted he did not expect to see much growth in the ethanol sector, and there would be a decrease in corn planting, which would be supplanted by soybean planting.

“We could still see a 14 billion-bushel crop,” said Murphy, even considering the decrease in planted acres.

To balance out the market another large hay crop is needed in 2014, and hay prices will be lower this year, according to Murphy.

“In general, we expect to see hay prices cheaper,” Murphy said. And cheaper feed prices are expected to help the bottom line in general.

Over the past year, energy use increased in non-developed countries and decreased in developed countries. Murphy also said the U.S. will be less reliant in regard to domestic energy production.

Diesel prices will continue to stay at a steep premium in comparison to gasoline prices, according to Murphy.

Kevin Good, CattleFax senior analyst and fed cattle market specialist, spoke about the supply, demand and price outlook, which included a continued rebuilding of the U.S. cattle herd and the effects of shifts in protein usage.

“We are in the process of starting to rebuild the herd,” Good said.

The rebuilding trend is evident based on the lower heifer on feed and cow slaughter numbers seen lately, according to Good.

“The bottom line is that fed steer and heifer numbers are going to decline,” Good said.

Good also predicted a decline in the amount of beef consumers eat in 2014, following the continued pattern shift in usage from beef to chicken the industry has seen over the past few decades.

“You would expect to see the U.S. consumer eat more chicken than last year and less beef,” Good said.

After Good, Blach delivered the profitability outlook and CattleFax’s 2020 vision for the beef industry.

“We are going to see much improved profitability for cow-calf producers,” Blach said. “These times where we are seeing profitability are long overdo.”

Blach also emphasized the need to see the U.S. cattle herd replenished after the decline in numbers it has seen over the last few years.

“We need to see the herd expand,” Blach said.

Looking to the future, Blach reiterated the need for a global focus as a key message of the CattleFax 2020 vision for the industry.

“These global markets are important,” Blach said. “We are the largest exporter of protein onto the market.”

There is an opportunity to continue to export tonnage to increase price, according to Blach. To prepare for this global beef market, Blach called for producers to expand the herd, anticipate and prepare for volatility and manage risk wisely.

Date: 3/10/2014

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