US - Last year’s remarkable prices may have topped out but US beef operations should remain “solidly profitable” for the next several years.
There is still a large packing sector chasing a limited supply and strong export demand tipped to continue growing as incomes rise, said Cattlefax CEO, Randy Blach in San Antonio last week.
Addressing the NCBA cattle industry convention, Mr Blach said that 2014 had combined good crop production and improving soil moisture for many areas, with rival proteins unable to fill the void.
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He said: “We expected high prices and we were right. Moisture really set the market explosive in the middle of the year.”
He said the beef herd could rise from 29 million head to 32-33 million head and “still be highly profitable”.
In 2014, the average fed cattle basis was $3-3.50 per hundredweight with regular 5-10 per cent swings - $8-$15. Calf prices doubled and traders saw the CME move 46 per cent from its daily low to high.
But he warned that ranchers shouldn’t take themselves too seriously. “These are wild times. None of us can forecast these moves.
“Access to credit remains critical. There’s been an 83 per cent increase in credit needs in five years, this is not going to end any time soon.”
On the level of profitability seen in the industry last year, he said: “We wish out mums and dads were here to see the run we’ve had.”
But record prices were a global phenomenon, said Cattlefax’s global specialist, Brett Stuart.
“Demand has overtaken supply,” he told the convention. “Eight years of zero production growth has occurred and we’ve added two Americas to the planet.”
US Department of Agriculture Predictions are for lower beef output in 2015 than last year. Meanwhile, corn and soybean acres are up two and three million respectively.
Ethanol will continue to feature in corn demand but is now “levelling off”, according to Risk Management Specialist, Mike Murphy.
He expects around five billion bushels of corn to go into ethanol this year.
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