U.S. families will continue to try stretch a stagnant dollar in 2017 according to Lance Zimmerman of CattleFax. He spoke with The Cattle Business Weekly about the recently released U.S. cattle inventory report, future calf prices and consumer demand.
Consumers, specifically the middle and lower income demographics, have not seen much growth in income. Families are using their money as efficiently as possible. This often means buying the cheapest protein at the grocery store and beef is not winning the battle against pork and poultry.
“Retail demand slipped in 2016 and it is expected to go down again as everyday items like ground beef are taking a hit from the cheaper proteins that are out there,” Zimmerman says.
Cattle By the Numbers
The cattle inventory report foreshadows record beef production in 2018 and 2019 as the U.S. cattle herd is shown to still be growing.
The total cattle inventory increased 1.8 percent to 93.6 million head on January 1, 2017 – pushing cattle numbers to the largest level this decade. Total cows increased 2.7 percent – reaching 40.6 million. That is the largest since 2009, and beef cows continue to make up the largest share of inventory at 31.2 million head.
“Heifers as a percent of the 2016 fed slaughter was the lowest since 1974 at 31.9 percent. This pushed beef replacement heifers on January 1, 2017, to 6.4 million head. It is up 1.2 percent compared to last year, and it is the largest number of beef replacement heifers on U.S. farms and ranches since 1997. It suggests the U.S. beef cowherd will likely see additional growth into 2018 unless significant culling occurs,” Zimmerman reports.
Zimmerman says there is a signal out there to start tapping the brakes on expansion.
While it might seem obvious to slow the growth of cow numbers, Zimmerman says there is also a signal for seedstock producers to re-evaluate if there is enough demand for bulls. The cattle inventory report showed an increase of 4 percent in bulls 500 pounds or heavier, totaling 2.23 million head.
“There is a risk for over capacity out there and bull breeders are going to have to decide how many bulls the bred heifer pool needs, what the shelf life of a bull is and they will certainly have to get better at customer service because it will help separate them from the rest,” Zimmerman says.
No Big Recovery
CattleFax predicts producers should begin to see less volatile markets and a more stabilizing atmosphere in the cow calf sector.
“Still, our highs might be smaller and our lows may dip a little lower,” Zimmerman says of prices.
Market price forecast for fall 2017 is 1.10/cwt for fed cattle, 1.30/cwt for 7-weight feeder cattle, 1.50/cwt for 5-weight calves.
“Prices are not bound for a big recovery. Producers will have to manage costs, invest in risk management and add value to their cattle,” Zimmerman notes.