A build-up of the national cattle herd, dynamics of international trade and competition from pork and chicken are making 2017 a transitional year for the U.S. cattle industry.
“We’re still swimming upstream against the current, and that’s an environment where it takes more decisive business planning and more business planning than when times are easier,” Jim Robb, director of the Livestock Marketing Information Center, said this week in an outlook video for Northwest Farm Credit Services.
The industry saw record-high prices in 2014 and has been building the herd, but prices have eroded since then. While the worse seems to be over, generally lower prices — but not dramatic declines — are expected for the next couple of years, he said.
The floods in Texas — which have been a disaster for many producers and have also damaged forage supplies — and the drought probably are not having an enormous impact in the short term, but they will likely push cattle to market, he said.
In other areas, however, some of the small-grains grazing areas, wheat graze-out areas and those types of planting programs are benefiting from ample moisture.
“So it’s a mixed bag, one that’s probably too early to tell. (Although) certainly the situation in Texas is very difficult for those producers,” he said.
On the broader stage, Russia has stymied the world in terms of exports there. Russia is not a big market for U.S. beef, but its import ban has an indirect impact as it affects exporters in competition with the U.S., he said.
“So the world is very much interrelated,” he said.
And there are other geopolitical uncertainties that could have a positive or negative effect on U.S. beef, such as the meat scandal in Brazil, renegotiation of NAFTA, possible renegotiation of the U.S.-Korea trade agreement and U.S. actions against North Korea.
There will be opportunities for U.S. cattle producers, but it’s a more difficult management environment than when cattle numbers are shrinking in the U.S., he said.
In putting together financial plans in the short term, cattle producers will want to take advantage of opportunities when they come along — such as the run-up in prices since last October until recently. But they should also be cognizant that there’s a bigger calf crop ahead and shouldn’t push things too far, he said.
The size of U.S. calf crops has increased each of the last three years, and the 2017 crop looks to be the largest since 2008. Based on the cowherd, both the 2018 and 2019 calf crops are expected to be even bigger. While calf prices are expected to be higher year over year in the last quarter of 2017, larger calf crops ahead will make it a challenging environment for continued price increases, LMIC reported in its latest Livestock Monitor.