Prices for hogs and feeder cattle have reached incredible highs this year—in some cases, going beyond what experts thought possible. At the same time, a different price situation is expected in 2015.
"I didn’t think the feeder calves could get this high," says Jim Bower, Bower Trading, on the U.S. Farm Report Market Roundtable. "I’ve hedged off earlier, but most of the hedging was done to protect the cow herd price, the cow numbers, because remember cows have gone from about $350 to almost $3,000 in about a six- to seven-year timeframe. It’s unbelievable.
"But the market is strange," Bower continues. "It has to go to a level high enough, long enough to destroy the demand, because if the supplies aren’t going to come, that market can’t handle this kind of volatility."
A recent visit to Montana points to several difficulties cattle producers have faced in recent months, Bower notes. Attracting young workers to the beef industry has been difficult because many of them find the pay provided in oil fields more enticing. Paying for soybean meal proved difficult because its price held strong from January through March.
"Consequently, we didn’t get the increased production in the chicken, the broiler, the turkey, the poultry industries like we thought," Bower explains. "Now that’s kind of leveled off, and that may be starting to change as we get some protein to compete with beef. But again, that market seems to me to be on a mission to demand destruct, the supply just isn’t there. With the boneless beef market as red hot as it is, we’re actually starting to see some foreign suppliers now starting to look at the U.S. market to compete. All in all, at Bower Trading what we’re trying to do is basically protect the cow herd price and let those individuals market their calves on their own."
Meanwhile in the pork industry, producers are seeing similarly favorable prices.
"I think we’ve probably already peaked this year in terms of hog prices," says Chris Hurt, Purdue University. "On a live-weight basis, we got near $100 per cwt. just like the cattle, kind of totally unbelievable. We’ve dropped back to the low $80s now, we think the summer’s going to be about the mid-80s on a live weight basis, and we drop down to the fall to about $70, $65 for the winter and something in the $65 to high $60s next year. So substantially lower prices. Major buildup I think we’re going to see in the pork industry and I think the poultry industry as well. As Jim points out, beef is just going to take longer before we can get our consumers more beef products."
Click the play button below to hear the complete Market Roundtable interview, including a discussion of mandatory PEDv reporting, starting at the 7:35-minute mark:
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