Blach Encourages Producers
To Look Ahead To ‘New Normal’
Markets beginning to stabilize.
Thousands of cattle producers from across the country gathered Feb. 2 for the 2017 CattleFax Outlook Session hosted annually in conjunction with the Cattle Industry Convention and NCBA Trade Show in Nashville, Tenn.
As CattleFax CEO Randy Blach opened the seminar, he addressed producers saying, “I know a lot of you have questions about these markets. It’s been one of the most volatile markets in history.”
To illustrate the market extremes, Blach cited the low prices of 2009, when fed cattle were selling at $80 per hundredweight (cwt.).
“A year later — boom — we woke up and fed cattle were at $173 per hundredweight,” he said. In jest, he added, “I’m sure you all forecasted that, too.”
Blach acknowledged that the last few years saw similar extremes. He noted the 2014 market offered record profit for the cattle industry, while 2015 was also good. Then, in 2016, the unraveling began and, Blach said, “The numbers shrunk.” He reports that in the last two years, there’s been more than 40% change in the market highs to lows, while the long-term average is typically about 21%.
“We’ve been double that … the dollar-per-head risk has more than doubled,” he stated, and noted that the volatility is not unique to the beef industry. “Grains, dairy, hogs and poultry have all been under a great amount of pressure.”
Regarding the current market, Blach said the market has come back 25% from the October 2016 lows. Blach and his CattleFax colleagues forecast that the market is beginning to stabilize.
As evidence of this, Blach cited the Bloomberg Commodity Index, which shows a nearly 60% drop in global indexes from 2011 to the lows in January 2016. Yet now, Blach says, “We see a market that has quit going down and is stabilizing.”
He attributes improved exports the last four months of 2016 to helping that stability, and stated, “Global markets are important. That’s loud and clear.”
Looking ahead, Blach said he believes the cattle cycle is back on track, and he anticipates that the worst part of this cycle may be behind cattle producers.
“We can’t rule another price break out, but I believe we’ve seen the lion’s share of the break,” he said. If the cattle cycle continues to follow a traditional path, Blach believes prices could be back toward the top near the end of this decade.
With all that said, Blach said he does not believe volatility will go away. Rather, of the highs and lows Blach queried producers, “Is this the new normal? I challenge you with that. Are we going to have to adapt to this as we move down the road?”
He encouraged risk management, adding, “We are in a highly volatile market that requires an incredible amount of capital, and you’ve got to be able to manage the risk.”
CattleFax has launched a new website and mobile app featuring news, video comments and calculators, decision tools and more than 100 data sets on site. Visit www.cattlefax.com for more information.
Editor’s Note: Field Editor Kindra Gordon is a freelance writer and cattlewoman from Whitewood, S.D. This article was written as part of Angus Media’s coverage of the 2017 Cattle Industry Convention. For further coverage watch for the March Angus Beef Bulletin and visit Angus Media online at www.angus.media.