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Yet another prediction for the beef business in 2019

Will consumers keep eating beef at levels high enough to overcome greater supplies? I think so.

One of the favorite things that ag economists and folks in the writin’ business like to do around this time of year is to look back at the year that was and predict what will happen during the year that will be. We’re sometimes wrong, but that hasn’t stopped us before and isn’t likely to slow us down anytime soon.

That said, I’ve been looking at some historical price graphs sent to me by Ed Czerwien, who does three market reports for beefmagazine.com every week, and found the information very instructive. One is this five-year chart of fed cattle prices.

Typically, and for the most part historically, fed cattle prices have followed a fairly predictable seasonal pattern—starting to climb around the end of a year and generally increasing through April of the following year, then a general decline through the summer and fall.

There are a lot of factors that contribute to that seasonal pattern, but the weight of cattle placed on feed and consumers’ seasonal eating habits are two of the most important.

What struck me about this graph is the deviation from that historical seasonal pattern the last few years and particularly 2018. Fed cattle prices began their upward tangent much earlier in the year. In fact, fed cattle prices began to uptick in September last year and the graph indicates that will continue.

Burt-Graphic-Jan9.pngIs this due to the exceptional beef demand we saw last year? I believe so.

Nobody predicted that kind of beef demand a year ago. But if you’re going to be wrong, that’s the way to do it. There’s no doubt in my mind that the exceptional beef demand we enjoyed both here and abroad last year put extra dollars on cattle prices.

Comes now the prediction for 2019. I think that exceptional beef demand will help underpin cattle prices this year, too. As to how much, I won’t hazard a guess.

READ: What's the outlook for the strength of the economy in 2019?

That’s because there are a few headwinds to overcome. One is more cattle. According to the Daily Livestock Report (DLR), as of December 1, the number of cattle on feed greater than 150 days is 35%, or just over a half-million head, more than last year. Those cattle will come to town soon.

In fact, DLR notes that supplies of cattle on feed for more than 150 days have routinely been larger than 2 million head in 2018, which has not been the case since 2016. That’s due to lighter weight calf-feds.

“This large volume is expected to get larger as the large placements of lightweight cattle in November and December need to be fed out,” DLR says. According to the K-State Focus on Feedlots report, fed steers that closed out in November were on feed an average of 177 days. So a calf put on feed December 1 would be expected to be harvested toward the end of May. Good timing for grilling season.

There will be a lot of tonnage to chew our way through. But I think we’re up to the task.

Then there are worries about the global economy. We enjoyed much better beef exports in 2018 that we’ve typically seen. But without a trade agreement with Japan, our number 1 beef customer, will that continue?

I think it will. The superior quality of U.S. grain-fed beef will win out, I believe, just as it did last year. But without a few trade agreements in hand, the outlook for a weaker global economy puts a tenuous tone to our export potential this year.

Check back in about 12 months and see if I’m right. In the meantime, it won’t hurt to keep your fingers crossed.

 

 

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