The US beef cattle sector now is will into the cyclical adjustment phase, transitioning from aggressive herd expansion to very modest growth, said the Livestock Marketing Information Center in a post to county Extension Agents this week.
A strong domestic economy and robust exports have buffered beef and cattle prices against near record-large US beef production and all-time highs in competing meats and poultry supplies, the LMIC said.
Thursday, the Financial Times reported that the US stock market jumped to a new record high on Thursday as investors brushed aside fears about escalating international trade tensions and focused on the booming US economy. The S&P 500 index climbed 0.8% by midday in New York, led by technology stocks.
Technology stocks have driven much of this year’s equity markets rally along with economy-sensitive sectors like materials and banks, the Financial Times said.
BEEF PRODUCTION FORECAST 3.3% HIGHER
US beef production this calendar year was projected at 27.1 billion pounds, an increase of 3.3% from last year. Fed cattle prices were expected to average 3.0% to 3.5% below 2017, the lowest annual average since 2011, the LMIC said.
In contrast, 2018’s calf and yearling prices were forecast to be slightly above 2016’s and 2017’s, the LMIC said.
There are unknowns and potential headwinds for cattle markets over the next few years, the LMIC said. Not the least of these is the potential for US beef, pork and chicken exports to falter under a cycle of tariffs and retaliation.
Also, any significant weakness in the domestic or global economy compared with the healthy conditions of the last 12 months could dampen demand for beef and cattle, the letter said.
SMALLER HERD GROWTH RATES
Smaller herd growth rates likely will translate into the rather modest year-over-year increase in beef production in 2019, the LMIC said. Assuming normal weather conditions, LMIC economists said to expect US beef output to be about 27.5 billion pounds, up 1.0% to 2.0% for the year.
That would be the smallest percentage increase since 2015, the last year to record a decline, the letter said.
WEAKER 2019 FED CATTLE PRICES?
In the first quarter of 2019, fed cattle prices could be below 2018’s, the LMIC said. In subsequent quarters, prices were forecast to be similar to a year earlier.
A normal 2019 Midwest corn crop would set the stage for steady to modestly higher yearling and calf prices in the second half of 2019, compared with the corresponding quarters of this year.
2020 COULD SEE END OF HERD BUILDUP
If current trends persist regarding cow and heifer slaughter levels, 2020 could mark the end of the current US cattle inventory build-up, the letter said.
Preliminary forecasts place beef 2020 beef output unchanged to up 2% from 2019. And if exports hold as the US economy builds, modest price gains could come then, too.
CATTLE, BEEF RECAP
No fed cattle sold Wednesday on the Livestock Exchange Video Auction, compared with 280 that traded four weeks previous at $109.50 per cwt.
Limited cash trading was reported this week at $111 to $111.50 per cwt on a live basis, steady to up $0.50 from the bulk of last week’s action. Dressed trade was reported at $170 to $175, down $2 to $4 from the bulk of last week’s trade.
The USDA choice cutout Thursday was up $0.27 per cwt at $204.52, while select was up $0.73 at $194.91. The choice/select spread narrowed to $9.61 from $10.07 with 114 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Wednesday, was $154.46 per cwt, up $1.38. This compares with Thursday’s Sep settlement of $155.67, up $0.15.