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Ridgway, IL | There are a couple points to make about heifers
1. The largest growth in any segment of cattle on feed is heifers. As the total number of animals on feed has risen, the increase has come 5:1 heifers to steers
2. With that being said, the herd continues to expand, as evidence by strong breeding stock prices...though the pace may be a little slower than what we’ve seen the past 4 years I think we can continue to expect growth in cattle on feed for at least another 18 mo.
We have 2 issues to deal with in the coming couple years. Obviously one is can we grow enough demand to offset our production... so far we’ve done really good at that. But, as you can see by this cof report, and the last half dozen of them, the increasing supply isn’t a fluke, and isn’t going to stop anytime soon... we have to grow demand at the same pace that we are growing the supply... which is a really fast pace. This is why I have been beating the drum on carcass weights... because we have been harvesting cattle at much lighter weights than year ago, we’ve been able to hold total production at about 4% (I’m going from memory on that) year over year growth.... however, due to a bunch of factors, we are gaining on last years harvest weights while continuing to kill much larger quantities... which is gonna push our beef production from 4% growth to?? 6? 7? I’m not sure where it can go... demand needs to continue to be amazing.
A more basic concern, is just that there has been so much packing capacity idled during the last contraction of the cow herd that now that we have actually seen major expansion, lack of capacity is just as much of a bottleneck as how good demand is. Packer margins are a function of the % utilization of packing capacity. Packer margins have been very good, and that is just going to be the norm until we see some expansion in capacity, which should happen in the next couple years... that’s just a natural part of the whole beef cycle. As cattle on feed gains on packing capacity, the packer will keep more and more of the value in the chain. The packer has the ability to pay more when they need to, but the feeder is losing leverage in negotiations. Broadly speaking.
I don’t know what to say about breeding stock, I really don’t think we are gonna get into a period where calf prices just hang at like 500$ For years or anything like that ... I do think the market will give us all opportunities from time to time, regardless of the segment you’re in. I think we are prone to more prolonged periods of prices that don’t work, with short pops that need to be used to extend risk management.
We should all listen to this webinar coming up in a few weeks, the cattlefax people offer some really thoughtful perspective.
http://mailchi.mp/cattlefax/cattlefax-upcoming-cattlefax-trends-web...
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cattle on feed report? Any comments
