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Bullish Outlook Complicated By Dairy Steers and Other 'Minor Irritations'

31 January 2014

US - Producers can be certain of cattle supplies remaining tight for 2014, while other factors, including the Californian dairy herd, muddy the waters on how markets will pan out.

Cold weather, country of origin labelling, bird flu and the US Food and Drug Administration stance on antibiotics were all highlighted by leading market analysts as minor irritants that could turn into major factors on an otherwise bullish cattle outlook presented by Allendale Inc. yesterday.

Going forward, Rich Nelson, Chief Strategist and Director of Research at Allendale, cited $140 cash cattle for February and averages of $141 for the first quarter.

Second quarter averages are anticipated to drop to $128 before a third quarter bounce to $136 with peak average values arriving in the fourth quarter at $142.

“Beef is a great story and is a fantastic opportunity,” said Mr Nelson during the Allendale Ag Leaders Conference Series. “We have high confidence in our numbers.”

However, complicating factors are many and varied, and Mr Nelson drew attention to the drought affected California cow herd.

He said the importance of the dairy herd on beef supply had regained importance because of sexed semen not proving popular with dairymen.

“Sexed semen was growing in popularity but more recently it has not been working out,” said Mr Nelson. “This is often linked with cost of semen and the current beef market.”

He advised producers to pay attention to the market impact of dairy steers and to be aware that the California drought may not be alleviated in the short term.

The national cow herd, just like California’s dairy herd, is set to contract. Allendale estimates are at one per cent because of the time lag required for expansion to reach fruition, said Mr Nelson, looking ahead to the eagerly awaited' US Department of Agriculture cattle report.

“The supply problem in cattle is long term,” said Mr Nelson, explaining that no major expansion has occurred since 1993/4.

“Cow slaughter has outstripped heifer retention for 20 years,” he added.

Even in 2004/5 the expansion attempt only saw heifers beat the cow disappearance figure marginally.

Further pressures could come from beef on the demand side. Mr Nelson explained that the Chinese bird flu outbreak could pose beef problems with increased competition domestically should import restrictions be imposed.

“If popular leg quarter products and dark meats are not able to be exported, this is a negative for the US industry because Grocers will be swamped with the lower end product,” said Mr Nelson.

Beef and pork ‘middle’ meat will be pressured by the inability to sell darker chick meat, heavily bought in China, where the higher fat and flavour portions are preferred.

Also, February sees the World Trade Organisation meetings on Country of Origin Labelling, key legislation for imports and exports alike.

“We already have one packer who says it will not buy Canadian animals,” said Mr Nelson. “There are also concerns on retaliation from an export standpoint as well.”

“Beef looks rather solid, but there are some questions ahead of us,” said Mr Nelson. “We do have a lot of minor irritants that could develop into major problems."

Allendale’s cattle futures targets started at $140 for February and then fell through summer, dipping to a June price of $126.

Mr Nelson said the perennial issue of weather patterns could hold sway with colder weather forecast into March but summarised that the take home message is beef is very bullish.

Michael Priestley

Michael Priestley
News Team - Editor

Mainly production and market stories on ruminants sector. Works closely with sustainability consultants at FAI Farms

 

Top image via Shutterstock



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