High cattle prices to reverse – as things tend to do
As with oil and potash prices, cattle prices have their ups and downs too. Hopefully, these larger profits are being put to good use while they last.
14 Jun 2016
‘Phenomenal’ cattle prices likely to taper off
It’s one of those glass half-empty/ half-full deals.
Cattle prices are likely to taper off this year — but remain the third-highest in history, a forecasting guru says.
“We’re on the opposite side of that bull market of 2014 and ’15 — requiring producers to have a game plan for that,” Anne Wasko, president of forecasting firm Cattle Trends Inc., told the Saskatchewan Stock Growers Association 103rd annual general meeting and convention in Regina on Monday.
Wasko cited a wide range of factors that have complicated the forecasting game, but two stand out.
The first is the growth in cattle numbers south of the border, where it’s expected to grow substantially this year.
That’s in sharp contrast to the situation in Canada, where Wasko sees cattle numbers basically remaining stable this year, with an increase of “maybe 0.5 per cent.”
That eventually will put more cattle on the market in the highly integrated North American market, said Wasko, adding that here in Canada, “it’s the wrong time to jump into expansion.”
The second factor at work is the volatile value of the Canadian dollar, which fell last autumn, making our exports more attractive — though it’s risen around 14 per cent since Jan. 1.
But even with the Canadian dollar moving upward, there has been an eight per cent increase in our cattle exports to the U.S. this year, and a hefty 16-per-cent rise in sales to the combined Hong Kong and China market — though this has been balanced by little change in sales to Japan and Mexico.
So if there is expansion of the North American cattle herd in the near future, “this period of expansion will be dominated by the U.S. — no question,” she said.
All this reflects the relative health of the U.S. economy when compared with the rest of the world, said Wasko, who underlined a U.S. Department of Agriculture prediction that beef tonnage will rise by about five per cent this year, with similar, if smaller, increases in pork and poultry — all fed by four consecutive large crops in the U.S.
That relative economic strength helps to explain why beef demand rose by about seven per cent last year even in the face of high prices.
Wasko wondered aloud whether those high retail prices could be a “double-edged sword” that raises profits, but also dampens demand, with possible significance in the fact that demand for beef in the allimportant spring grilling seasons in the U.S. has been lower than in either of the last two years.
Further muddying things — literally — are what’s happening in some of North America’s biggest rivals: excess moisture in Argentina and drought next door in Brazil, while the U.S. so far has seen moisture that has let its crops get off to a good start.
“There are extremely good prices,” she said, summing up. “They’re just not going to be at the level of 2014 and ’15.”