Price shock in US beef market over

By Oscar Rousseau

- Last updated on GMT

El Niño storm replenished moisture in drought-hit areas like Foxen Canyon, California
El Niño storm replenished moisture in drought-hit areas like Foxen Canyon, California

Related tags: Cattle, International trade, Us, Beef

Shock market conditions, including a plummeting cattle price and tight protein supply, created the ‘perfect storm’ for US beef producers between 2014 to 2015 but the worst is behind the sector, according to Randy Blach, CEO of research organisation CattleFax.

The price per pound of US beef fell by nearly 28% between January and December 2015, according to data from the statistics company Index Mundi. This downward spiral in beef prices, which began to fall in September 2014, has made the market tough for beef farmers but conditions are expected to ease.

We are coming off 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.​”

Price shock

CattleFax is a data and analytics research firm, specialising in providing actionable insight to the global beef industry. Blach made his comments last week at the National Cattlemen’s Beef Association (NCBA) trade show in San Diego, California.

With the big price shock nearly over, CattleFax analysts have predicted cattle feeders will lose approximately $200 per head, with feed prices expected to average $130 to $145 this year.
The cow and calf margins will still be profitable, but substantially lower than in the past two years,” ​said Kevin Good, senior analyst and fed cattle market specialist at CattleFax. “We predict cattle feeders will have tight margins for the year overall with potential for profit mid-year.​”

Russia - America’s unlikely ally

CattleFax analysts also predict a $66 drop per head in cattle exports from 2014 values. This decrease in export potential will be caused by a combination of the strong US dollar, slowdown in global markets like China and challenges over access to additional markets.

Russia and China are still the biggest opportunities for US beef, but trade restrictions will continue to limit potential in the year ahead,​” Good added.

After much of central and eastern America was hit with a severe drought in 2012, a two-year El Niño weather pattern has replenished moisture conditions across the country, and the weather outlook seems favourable.
As we head into 2016, a split jet stream pattern will favour above-normal precipitation from California to the Southern Plains and the south east through March,​” Professor Art Douglas said.

In the Corn Belt, spring will be wetter than normal, which will be accompanied by slower spring warming. Delays in fieldwork and planting dates are likely to result.​”

Related topics: Meat

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