Strong beef demand and timely marketing of finished cattle in 2018 are two key factors setting the stage for a good year in the cattle business. But other positive indicators should also keep cattle producers in the black.
“I am pretty optimistic for this business, for the industry as we start 2019,” John Nalivka, owner of Sterling Marketing in Vale, Ore., said.
Ending the year with fed cattle trading at $122 to $123 per hundredweight is a pretty good start, he said.
The number of cattle on feed has been large, but the on-feed inventory coming into the year is in good order — up just 1 percent year over year, he said.
“I don’t think we have a huge supply to work through, he said.
Feedlots have stayed current with marketings, and they didn’t let carcass weights run up — and there was opportunity to do that with favorable feed costs, he said.
“I thought possibly weights would pick up. But feedlots kept current and weights didn’t get away. That makes a world of difference,” he said.
Other positive factors for markets are strong demand for beef and consistent quality, with choice grade running 82 to 85 percent of slaughter, he said.
“We’ve got the equality, markets stayed in tack, the economy is good, unemployment is down sharply, wages are starting to gain and there are plenty of jobs. People have money, they like beef and they’re buying beef,” he said.
In addition, exports have been strong all year. If things keep clicking along as they are, it spells a pretty good year in the cattle business, he said.
The industry also sent a lot of cows to slaughter, up 12 percent year over year at certain times, he said.
“The bottom line is we killed a lot of beef cows. At the same time, we didn’t bring a lot of heifers in (for replacement). So we stalled expansion,” he said.
Combined with higher dairy cow slaughter in the fourth quarter of 2018, total cattle inventory should only be up about 0.5 percent year over year at the start of 2019, he said.
“We slowed the rate of increase in expansion in the beef herd and reduced the size of the dairy herd,” he said.
Based on data through November, beef cow slaughter should be up 9 percent year over year and account for 9.7 percent of the beef cow herd — the highest rate since 2013 when the industry was liquidating, he said.
“I don’t see any liquidation, but we kind of stalled expansion,” he said.
He thinks the Jan. 1 beef cow herd will be even with a year earlier.
He also thinks the 2018 calf crop will come in with a 1.4 percent increase year over year, lower than USDA’s forecast of a 2 percent increase.
There was a pretty sharp drop in the market in 2016 and not much motivation to keep heifers, which would have calved in 2018, he said.
Given overall cattle numbers and feedlot demand, prices for calves and feeder cattle should remain strong. Returns to cow-calf operators in 2018 were about $160 per cow and shouldn’t be too far off from that in 2019, he said.