Texas Agriculture November 18, 2016 : Page 26

Larger beef supplies, weaker markets face ranchers By Julie Tomascik Associate Editor A young cow herd, a bright out-look and strong beef demand. Farm-ers and ranchers saddled up for what was hoped to be a long drive that would lead to sustained high cattle prices. Times were good. But that was last year. This summer and fall, cattlemen experienced a big case of sticker shock. Just two years ago, the U.S. had the smallest cattle inventory—less than 30 million head—since the 1950s. A drought-induced herd re-duction decreased production and the lost supply sparked the massive price swell for cattle and beef. “2014 will go down in history as a time when cattlemen couldn’t do any wrong. Supplies were tight. Prices were high, and costs were very man-ageable for the cow-calf sector. So that part of the industry made what some would dare to call profits,” said Tracy Tomascik, Texas Farm Bureau associate director of Commodity and Regulatory Activities. At that time, the market clearly signaled cattlemen to raise more beef. When the drought broke, Texas ranchers responded to the opportu-nity. Replacement heifer retention and restocking depleted feed stor-age, and keeping older, less produc-tive cows in the herd another year or two set the stage for rapid herd expansion. “With record high prices, we’ve been expanding our cow herd. As we expand more cows, that means more calves, more animals for sale,” Da-vid Anderson, Texas A&M AgriLife Extension Service economist, said. “Those calves have had time to grow up, go through a feedlot and in-crease our beef production.” The growing supplies alleviated some purchase pressure off buyers that competed for the most expen-sive calves ever seen. After the summer of 2015, the cattle market started seeing sharp declines across the board. Now a year into the downward swing, the lower prices are tough to compre-hend. “We’ve been down 40 percent to 50 percent in terms of calf prices from those records, depending on the weight breakdown,” Anderson said. And livestock auctions are also ready for week-to-week stability. “Hopefully, we have hit a range in here where we can trade cattle and get a little stability back in the mar-ket,” Jesse Carver, executive director of the Livestock Marketing Associa-tion of Texas, said. But considering the path to those record high prices, it’s easy to forget that ranchers started that journey when a good day at the sale barn was $90 per hundredweight for weaned calves. “Selling calves today looks aw-fully cheap, but I remember eight or nine years ago selling $400 calves,” Carver said. Cheaper calves indicate greater supply is hitting the market and beef production is now on the rise. In August, steer slaughter moved 13 percent higher than a year ago, and heifers increased more than 20 per-cent in the same timeframe. “It’s more evidence that farmers and ranchers replenished their pas-tures over the last couple years by keeping heifers out of the feedlot. You don’t jump 20 percent of slaugh-ter in a year without comparing to unusually low placements in early 2015,” Tomascik said. “Combine that with increased carcass weights and you have a lot more beef heading to the market.” That should make purchasing beef a little cheaper at the meat counter, but don’t expect to see a choice ribeye marked at half cost of last summer like farmers are experi-encing with live cattle. “Particularly in retail, prices go up faster than they go down. So while we are seeing retail beef prices come down, they haven’t come down near as fast as the live animals have,” Anderson said. “At a restaurant or grocery store, you’ve got to keep the lights on, pay everybody, keep those coolers cold and retailers are pretty reluctant to cut prices.” The fundamentals of supply and demand still suggest a lower trend for beef prices at the retail grocery level. The U.S. Department of Ag-riculture’s average price for choice beef across all cuts continued to show declining prices last month and greater beef supplies will sus-tain that movement. But global trade could counter the retail price slide. “With lower prices, we are going to be more price competitive in the world market, and I think that’s go-ing to boost our exports in the com-ing years,” Anderson said. “In my forecast, I think long term we will see a lower trend in live cattle and retail beef, but it will be propped up with expanding markets and healthy beef demand.” 26 N OVEMBER 18 , 2016

Larger Beef Supplies, Weaker Markets Face Ranchers

Julie Tomascik

A young cow herd, a bright outlook and strong beef demand. Farmers and ranchers saddled up for what was hoped to be a long drive that would lead to sustained high cattle prices. Times were good.

But that was last year.

This summer and fall, cattlemen experienced a big case of sticker shock.

Just two years ago, the U.S. had the smallest cattle inventory—less than 30 million head—since the 1950s. A drought-induced herd reduction decreased production and the lost supply sparked the massive price swell for cattle and beef.

“2014 will go down in history as a time when cattlemen couldn’t do any wrong. Supplies were tight. Prices were high, and costs were very manageable for the cow-calf sector. So that part of the industry made what some would dare to call profits,” said Tracy Tomascik, Texas Farm Bureau associate director of Commodity and Regulatory Activities.

At that time, the market clearly signaled cattlemen to raise more beef.

When the drought broke, Texas ranchers responded to the opportunity. Replacement heifer retention and restocking depleted feed storage, and keeping older, less productive cows in the herd another year or two set the stage for rapid herd expansion.

“With record high prices, we’ve been expanding our cow herd. As we expand more cows, that means more calves, more animals for sale,” David Anderson, Texas A&M AgriLife Extension Service economist, said. “Those calves have had time to grow up, go through a feedlot and increase our beef production.”

The growing supplies alleviated some purchase pressure off buyers that competed for the most expensive calves ever seen.

After the summer of 2015, the cattle market started seeing sharp declines across the board. Now a year into the downward swing, the lower prices are tough to comprehend.

“We’ve been down 40 percent to 50 percent in terms of calf prices from those records, depending on the weight breakdown,” Anderson said.

And livestock auctions are also ready for week-to-week stability.

“Hopefully, we have hit a range in here where we can trade cattle and get a little stability back in the market,” Jesse Carver, executive director of the Livestock Marketing Association of Texas, said.

But considering the path to those record high prices, it’s easy to forget that ranchers started that journey when a good day at the sale barn was $90 per hundredweight for weaned calves.

“Selling calves today looks awfully cheap, but I remember eight or nine years ago selling $400 calves,” Carver said.

Cheaper calves indicate greater supply is hitting the market and beef production is now on the rise. In August, steer slaughter moved 13 percent higher than a year ago, and heifers increased more than 20 percent in the same timeframe.

“It’s more evidence that farmers and ranchers replenished their pastures over the last couple years by keeping heifers out of the feedlot. You don’t jump 20 percent of slaughter in a year without comparing to unusually low placements in early 2015,” Tomascik said. “Combine that with increased carcass weights and you have a lot more beef heading to the market.”

That should make purchasing beef a little cheaper at the meat counter, but don’t expect to see a choice ribeye marked at half cost of last summer like farmers are experiencing with live cattle.

“Particularly in retail, prices go up faster than they go down. So while we are seeing retail beef prices come down, they haven’t come down near as fast as the live animals have,” Anderson said. “At a restaurant or grocery store, you’ve got to keep the lights on, pay everybody, keep those coolers cold and retailers are pretty reluctant to cut prices.”

The fundamentals of supply and demand still suggest a lower trend for beef prices at the retail grocery level. The U.S. Department of Agriculture’s average price for choice beef across all cuts continued to show declining prices last month and greater beef supplies will sustain that movement.

But global trade could counter the retail price slide.

“With lower prices, we are going to be more price competitive in the world market, and I think that’s going to boost our exports in the coming years,” Anderson said. “In my forecast, I think long term we will see a lower trend in live cattle and retail beef, but it will be propped up with expanding markets and healthy beef demand.”

Read the full article at http://texasagriculture.texasfarmbureau.org/article/Larger+Beef+Supplies%2C+Weaker+Markets+Face+Ranchers/2641473/358629/article.html.

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