By Kindra Gordon

“We think the [beef] industry will continue to be profitable. We are optimistic about that,” said CattleFax’s Randy Blach during a market outlook session on Jan. 30, 2019 at the Cattle Industry Convention in New Orleans, LA. Additionally, Blach shared that their projections show limited liquidation within the cow-calf sector and Blach indicated, “We expect cow-calf producers will continue to be profitable going into the early part of the next decade."  

Stockers and packers are also expected to fair profitably, while feeders may have tighter margins. Blach attributes the largely favorable forecast to export and demand growth. But he cautions that cyclical price risks and volatility will continue in the marketplace.

Specifically, for 2019 cattle prices are projected to average: fed cattle averaging $117/cwt. within a range of $100-130. For 750 lb. feeder steers $147/cwt. within a range of $130-160. The 550 lb. steer calf market is expected to weaken slightly from 2018 to $164/cwt., which is down $9. Spring prices may reach the mid-$180s, but a larger calf crop could push the fall run to the $140s. 

An additional supply of cull cows, with some numbers coming from dairy, is expected to weigh on the market. Spring highs are projected near $60/cwt. with the fall low in the lower $40’s.

For bred cows, as herd expansion ends and the calf market softens slightly demand for females is expected to weaken. Bred female values are expected to moderate within the range of $1,200 to $1,800/head. 

On the trade front, CattleFax analysts express that trade disputes and negotiations will continue to play a role in which direction cattle prices go. Ratifying the renegotiated United State-Mexico-Canada Agreement will be critical. As well, eyes are on getting a bilateral agreement with Japan to ensure a level playing field with Australia when it comes to beef trade there. Ironing out a Chinese trade agreement by the March 1deadline is also on the watch list. 

Notable Numbers

Since 2014, the cattle industry has been in a herd expansion cycle, resulting in 6.5 million more beef cattle in the past five years. But, the rate of expansion is slowing with 510,000 more beef cows added in 2018, and only 180,000 cows projected to be added in 2019. For 2020 another 100,000 cows could be added, with the rate of expansion expected to be flat by 2021.

Additional numbers to note:

• Record large beef production is expected in 2019 at 27.3 billion pounds. Domestic beef, pork and poultry production is slated for 1.8% increase in 2019, resulting in 103.37 billon lb. of animal protein. 

• Growth in higher quality beef production is benefitting beef demand. Prime and Choice quality grades will account for nearly 80% of beef production in 2019. CattleFax suggests the quality improvement has added $20/cwt to fed cattle and $50/cwt to calf prices.

• Per capita beef consumption remains steady at about 57 lbs. for 2019.

• Expect 2019 U.S. beef exports to increase 6% to 3.3 billion lbs. in 2019, which is documented to add $360 in per head value.

• There was a 2.7% increase in consumer spending in 2018, which helped beef demand and the economy. Later in 2019 the economy could slow down. Along with that, expect retail gasoline to be in the $2.30 to $2.90/gallon range. 

• CattleFax also says there could be one or two interest rate hikes of a quarter percent during 2019.

• Corn acres are expected to increase 2 million acres in 2019, while soybean acres decline by about the same (2.2 million acres). Spot corn futures is projected at $3.60 to $4.10/bu. for the first half of 2019.

• Hay production is projected to be steady for 2019 because with favorable growing conditions. The national hay price average is forecast at approximately $145/ton.

Milder Weather

The El Niño pattern is expected to subside during the first half of 2019,  according to Art Douglas, professor emeritus at Creighton University. Douglas expects the eastern third of the United States will be drier, as the jet stream pushes moisture from the Gulf of Mexico across the southern tier of the nation. “After a cooler February, the United States will mostly enjoy a relatively mild spring with a reduced threat of delayed planting,” says Douglas. He points out that summer weather will be dependent on how quickly El Niño conditions fade.

Douglas is forecasting a very mild spring all the way from Washington and Oregon across the U.S. to New York and relatively cool conditions in Texas. “Unlike most El Niños, this El Niño looks like it’s going to be relatively wet in the Pacific Northwest and Southwest. On the other hand, in the Corn Belt, which has been relatively moist ever since last summer into the fall and winter, it’s going to be dry.”

“We translate that into the forecast for the summer, temps remaining warm in the northern tier of states associated with that ridge and good moisture coming out of Mexico into Texas all the way through Arizona and New Mexico, up to Colorado and Utah. And again, we have that dryness in the Midwest that we have to watch out for. I’m not forecasting a drought, but a dry spring followed maybe by a dry summer. So there could be a spotty drought that develops through the Corn Belt.”

Watch List 

As the year unfolds, there are several factors to monitor that could affect prices. Trade access will be a big one. Additionally, the potential for an economic slowdown going into 2020 is a concern. An increase in interest rates, tight farming margins which are pushing consolidation, and the political environment  could all affect the beef and ag industries.

CattleFax’s Blach also suggests changing consumer preferences and expectations will need to be monitored. Interest in traceability and transparency from the industry will continue to be sought by consumers, and fake meat may gain some market share traction, he anticipates.

Other concerns include harvest capacity, which is not increasing measurably. And, African Swine Fever is considered a wild card that could affect global pork supplies in 2019 and 2020, which could then impact beef supplies and prices if global consumers turn to beef to fill the loss of available pork retail product.