This year is definitely one that’s going to require a plan that drives your marketing moves. In addition to structure, flexibility is key to capture a run up in prices along the way. A little luck doesn’t hurt, either. The tables are turned, as the livestock sector looks forward to profitable days ahead while crop prices take a hit. The following is a snapshot from leading experts on how 2014 is shaping up for the major commodities.
Prices, Exports Stay Rosy for Beef Cattle
Beef cattle fundamentals are shaping up to deliver a profitable and possibly record-breaking 2014. It’s no coincidence that as corn prices declined, cattle prices rallied. Stocker and feeder cattle have posted 25% to 30% price gains since May, boosting the feeder cattle index price for 750-lb. steers to more than $165 per cwt. Falling corn prices also provided a much-needed boost for feedlot operators. After two years of negative margins, cattle feeders are back in the black.
According to Sterling Marketing Inc. of Vale, Ore., feedyards saw profits of nearly $123 per head in early November.
Analysts point to declining supplies of cattle as the foundation of a strong market. The Jan. 1, 2013, inventory of beef cows was the lowest in 60 years, and number crunchers say cow inventories will be smaller again in early 2014.
Feedyards and stockers will aggressively seek cattle of all sizes, which will support higher calf and feeder cattle prices.
Robust beef exports add to a bright outlook. The U.S. Meat Export Federation says in the first eight months of 2013, beef exports are up 1% in volume and 10% in value to 767,017 metric tons valued at $4.01 billion. The export value per head of fed slaughter beef in August averaged $253.87, up $46.16 from 2012.
Can anything derail a booming cattle market in 2014? Analysts are nervous about ever-increasing retail beef prices and the effect on demand. Average retail beef prices in August 2013, the latest data available, was a record $5.39 per pound, according to USDA’s Economic Research Service.
Exports Dominate U.S. Dairy Forecast
Dairy economists are pointing to exports as the brightest constellation in 2014—with good reason: U.S. dairy exports in 2013 mark a fourth consecutive record year, as well as a new high for the ninth time in 10 years. U.S. dairy exports rose nearly 30% in value to $6.6 billion, compared with year-earlier levels, says Alan Levitt with the U.S. Dairy Export Council. In volume, exports of milk solids climbed by about 18% to 3.9 billion pounds.
U.S. dairy exports are on track to account for an impressive 15.4% of the nation’s 2013 milk output. "Five years ago, we exported just 5% of our milk production," Levitt says.
Adding to 2014’s optimistic outlook are improving margins for producers fueled by strong milk prices and lower feed costs. "Income over feed costs this year look to be the best since 2007," Levitt says.
Despite these factors, market watchers see a few clouds ahead. One feed source not expected to get any cheaper is alfalfa hay. Top-quality hay is $280 to $300 per ton.
Sluggish domestic consumption and high product inventories also remain concerns. Even so, analysts expect to see a surge in milk production as dairies seek to boost profits. That’s likely to pressure milk prices.
"Milk prices won’t collapse, but they may drop to $16.70 per cwt. by February," says Robert Cropp, professor emeritus at the University of Wisconsin-Madison.
Jerry Dryer, editor of the Dairy & Food Market Analyst newsletter, expects Class III prices to dip to $16 per cwt. in the third quarter of 2014 before rising to $16.75 in the fourth quarter. Class IV, which represent dairy powder products, will see strong demand overseas, just as Dairy Farmers of America’s new powder plant comes online in Nevada.
Pork Industry Ready to Hog More Corn
This past year was a turnaround time for cash-strapped hog producers. Low herd numbers and much lower corn prices has returned profitability to the industry. Chris Hurt, a Purdue Extension ag economist, says during the first half of 2014, hog producers should see profits of approximately $30 a head.
- January 2014