Market Outlook for 2015
CattleFax CEO says 2015 cattle markets will be good, but they won't be a repeat of 2014.
Cow-calf producers can keep smiling at anticipated calf prices in 2015. The market “will remain solidly profitable for the next several years,” Randy Blach, CEO of CattleFax, told the more than 8,100 attendees at the Cattle Industry Convention & NCBA Trade Show during the CattleFax Outlook session Feb. 5 in San Antonio.
However, Blach acknowledged that prices will likely not reach the record-breaking highs that were seen in 2013 and 2014.
“That’s pretty hard to replicate. You can smile, it’s been fun,” he told producers, “but times will still be pretty good.”
As the U.S. beef herd begins to expand, Blach says the industry can handle another 3 million head and still be highly profitable.
As the U.S. beef herd begins to expand, Randy Blach says the industry can handle another 3 million head and still be highly profitable.
“We still expect $200 to $220 per hundredweight (cwt.) for calves from 2016 to 2018,” he said, adding that going forward, “Calf prices will be much more seasonal.”
Speaking to the price swings that have become common, Blach told all segments of the industry, “You need to make sure to manage risk and be margin-focused. Volatility in this market has been unprecedented. We see 5% to 10% swings every few weeks,” which is equivalent to $8 to $16 per cwt., or about $100 per head.
“There isn’t any of us who can forecast these moves. [These are] some wild times we are dealing with. The last three to four months we’ve seen the markets push up and then break,” he stated. “We’ve got to focus on managing risk; these are big swings. Take margins when they are there.”
Blach also emphasized the importance of adjusting for basis using current market levels. He said, “Adjusting basis accordingly is critically important.”
Specifically for cattle feeders, Blach said, “Margins are going to be tough; there is a lot of feeding capacity chasing limited supply.” He projected prices will reflect lower highs and lower lows.
“That’s what you should be aware of. Be prepared to get back toward $130 on fed cattle in a year,” he recommended.
In his closing remarks, Blach noted the huge variation in production costs, which can range from $500 to $1,100 per head. He also mentioned the increasing amount of capital that beef production requires.
“Keep that in mind,” he cautioned and advised utilizing risk-management strategies.
Blach stressed the continued importance of beef exports and maintaining global access. He shared that exports have added $352 in value per head.
“If this trend continues,” he concluded, “exports could contribute as much as $500 per head by 2020.”
For more coverage of the 2015 Cattle Industry Convention & NCBA Trade Show, visit the Newsroom at www.4cattlemen.com.
