We will remember 2015 as the second-best year ever for cow-calf profitability, with 2014 notching the record. What’s ahead for 2016? Here, in no particular order, are the top 10 megatrends to watch.
- Cow herd growth. As long as the weather continues to cooperate, more heifers will be retained and the nation’s cow herd will continue to grow.
- Expansion challenges. Competition for pasture may keep strength in land rent and purchase prices, as well as other inputs. Also, will beef producers fall into the same trap that caught some corn producers — growing too big, too fast and not preparing for the inevitable drop in prices?
- Cattle price adjustment. As cattle numbers grow, there’s no reason to expect the bottom to drop out of the market. Rather than selling into ever-higher markets, as in the past few years, cattle producers will face a market where prices will continue to decline year over year on average.
- Increasing economic volatility. With jarring global economics like the U.S. bailout of major corporations, lost steam in China’s economy and the likelihood of the first domestic interest rate increase in years, all markets — and especially cattle and grain markets — will see continued volatility in 2016.
- Focus on options to antibiotics. With the December 2016 deadline for the Veterinary Feed Directive looming, more products and conversation will be introduced surrounding how to manage with fewer antibiotics in total, and how to manage under the new regulations. Expect continued pressure to restrict producers’ use of all antibiotics and delivery methods in the years ahead.
- Focus on government and regulation. The 2016 election cycle will set the tone for what cattle producers can expect in legislative and regulatory activities.
- Philosophical divide among cattlemen. The reaction to legislative and regulatory issues is not uniform across the beef business. Philosophical differences over country-of-origin labeling and international trade, for example, have divided cattle producers and industry organizations. That divide will get wider before it narrows, if it ever does.
- Continued push for value-based calf marketing. With projections that calf prices will decline in coming years, more producers will look to get paid more for calves up front. That will provide an opportunity for value-added marketing programs to expand.
- Continued reliance on global markets. Restoring, maintaining and growing international markets will be key to maintaining profitable cattle prices as the U.S. cow herd expands.
- Retailer, consumer demands. Continued efforts by grocery and foodservice companies to adapt to their perception of consumer wants and demands will keep pressure on traditional beef production.
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