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Blach to Cow-Calf Producers:
'The Payday Is Just Beginning'

 

by Kindra Gordon for Angus Productions Inc.

Back to the Angus Beef Bulletin EXTRA

DENVER (Feb. 4, 2011) — “We’re going to see some real profitability over the next several years,” Cattle-Fax’s Randy Blach told cow-calf producers in attendance during the popular Cattle-Fax Annual Outlook seminar presented during the Cattle Industry Convention Feb. 4 in Denver.

 

Specifically, Blach told cow-calf producers, “The payday is just beginning.” He also noted that stockers and packers have experienced good prices during the past year and he anticipates that to continue. Cattle-Fax projected that prices on all classes of cattle will be record high in 2011 and 2012.

 

Blach credited the favorable conditions to supply and demand, saying, “The supply side of this business remains very bullish. It’s very, very positive.”

 

“A year ago we said if demand was steady our markets would be high," he added. "We needed exports to improve and people going to restaurants again. We’ve seen all those things happen. We had nearly a 20% improvement in exports last year and that was one of the main drivers in the market.”

 

Specifically, Blach noted that the uptick in demand —particularly from international consumers — has been responsible for a $100-per-head improvement in prices. Along with that, hide and offal value — again mostly via exports — added $40 to the value of cattle in 2010.

 

Blach did note that today’s marketplace is one that is different than the industry has ever seen — and it is very much influenced by global activity. His advice to the cattle sector was to find ways to adapt and keep up with the changes.

 

“Adapting to this new environment is one of the things we are all challenged with. You have to have an open mind. And, you have to think five to 10 years down the road. Volatility is here,” he stated.

 

What do CattleFax analysts anticipate for 2011? Here are highlights from their outlook:

 

Cattle Supplies

• Total cattle numbers are down 1.4% for 2011 and another 1%-1.5% decline is expected by 2012.
  
  
• Reduced slaughter levels of fed steers, heifers and cows are expected to result in a 373 million pound (-1.4%) reduction in beef production despite a moderate increase in average carcass weights.
  
  
• Reduced beef production and increased exports are expected to drive 2011 per capita net beef supplies lower for the fifth consecutive year.

Beef Demand

• Domestic beef demand is expected to be steady to slightly better during the next two years.
  
  
• Higher fed-cattle prices will result in higher retail prices and could influence menu prices.
  
  
• Retail beef prices are expected to be less competitive compared to pork and especially chicken in 2011.

Cattle and Beef Prices

• Record-high prices are forecasted for all classes of cattle in 2011 with continued increases in 2012.
  
  
• Fed-cattle values are expected to average near $103 per cwt. in 2011 with higher prices again in 2012.
  

• Feeder-cattle values are projected to average near $118 per cwt. and calf values are projected near $138 per cwt.
  
  
• Cull cow values will also experience an increase, averaging near $65 per cwt.

Global Picture

• Many global economies are recovering more quickly than the U.S., with global beef demand rebounding. Beef exports are expected to increase 8% in 2011 and continue to rise in 2012.
  
  
• Expanded market access to Japan and re-opening China to U.S. beef exports would be very supportive to wholesale beef and cattle values.