Outlook Positive

Consumer Demand Key for 2018 Cattle Market

Victoria G Myers
By  Victoria G. Myers , Progressive Farmer Senior Editor
Slightly lower prices this year are likely as expansion continues. (DTN/Progressive Farmer photo by Victoria G. Myers)

More than 7,500 people attended this year’s National Cattlemen’s Beef Association convention in Phoenix, Arizona. And like most years, it looked like every one of them showed up for the annual CattleFax outlook presentation.

Increased market swings, concerns over price transparency and growing supplies may create more uncertainty, but CattleFax analysts presented a mostly positive outlook, as the organization celebrated its 50-year anniversary.

Looking at the overall economy, market analyst Mike Murphy, said tax reform and historically low unemployment (4.0-4.5% for 2018) would help boost demand for beef. He anticipated the Gross Domestic Product this year would be 2.5% to 4%, and said interest rates will likely go up, but that “inflation is not negative for retail beef values.” Murphy projected retail fuel costs would average $2.88 per gallon for gasoline; and $3.04 for diesel.

With regards to corn, soybean and wheat production, he’s anticipating 8% more cattle on feed in 2018—as well as more hogs and chickens. Murphy kept to the yield trend line on corn of 172.2 bushels per acre on average; with 91 million acres planted in the U.S. Soybean acreage was projected at 90 million acres; and wheat at 45.5 million acres. Hay values, he added would likely be elevated through 2018, due to tight supplies, more livestock to feed and weather-related price risks. He said average prices could increase $10 to $15 per ton this year.

Kevin Good, senior market, presented the outlook for the cattle industry. He expects continued herd expansion, noting that between 2014 and 2018 some 6 million total head will have been added to the herd. He attributed the impressive rebound to both good grazing and overall profitability in the beef industry.

Last year, Good said producers added 1,047,000 head to the beef cow inventory. They will add 510,000 more head this year, and in 2019 the increase is forecast to continue at a slower pace of 250,000 head. By 2020, expansion ends and herd size holds level.

This larger cow herd will mean a 3% increase in steer and heifer slaughter, to 26.6 million head this year. Along with that, cold carcass weights will increase by as much as 10 pounds to 822 pounds in 2018. Last year cold carcass weights averaged 812 pounds. Total beef production will increase by 1.3 billion pounds (+5%) in 2018, to 27.5 billion pounds. All of this additional beef will be met with a continued increase in both exports and domestic consumption.

Good noted in 2017 beef exports jumped 12%; for 2018 he expected that trend to continue at a slower rate of 6%. Domestically, per capita beef consumption continues to push the envelope. In 2016, it stood at 55.6 pounds; in 2017 at 56.6 pounds, and for 2018 Good said it would go to 58.4 pounds. Pork and poultry are also boosting production this year, with pork projected up 5.1% (+1.3 billion pounds) and poultry 1.5% (+700 million pounds).

The price forecast, in a market that will continue to be volatile, put average prices for fed steers around $115/cwt, down $6. Feeder steers (750 pounds) would average $145/cwt, down $1; and steer calves (550 pounds) $158/cwt, down $7. Utility cows are projected to average $60/cwt, down $4.

Key areas to watch, that could impact the cattle market in a big way would include consumer demand, trade agreements, harvest capacity bottlenecks, traceability concerns and competition from plant and insect-based proteins.

For more details: www.cattlefax.com

Victoria Myers