Expect volatility in 2015 beef business, says Ag Days speaker

Will 2015 be a repeat of 2014’s amazing ride? Unlikely, says beef industry analyst

Canadian cattle and beef prices reached all-time highs in 2014 but 2015 will be a different story, market analyst Anne Wasko of Gateway Livestock told an Ag Days seminar last week.

Retail prices will remain high and are expected to go even higher, while export and domestic demand should stay strong. But there are changes coming to supply and more volatility coming to the market, Wasko said.

Last year the market headed straight up week after week during what she dubbed “the perfect storm” of high retail prices protein-hungry customers were willing to pay and a North American inventory of tight supply.

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“This year will be very different than last year. It’s not straight up from here,” she said. “I do think we’ve moved into a price plateau as far as where prices can trade.”

The Canadian cow numbers are down, which comes as no surprise to anyone, said Wasko.

“I think when we do see the StatsCan release with the numbers for this year (which will be the third week of February) they’re going to show it down again, and we did not move into any kind of expansion phase,” Wasko said. She noted producers did sell fewer cows last year, but the cull rate, as a percentage of the size of Canada’s cow herd, remains high.

“It’s likely up around 13 per cent. We’re going to need to see that number drop down into that 10 per cent or below bracket before we can say we’re in expansion,” she said. And watch what producers are doing with 2014 heifers, she added, because that, plus what does or doesn’t happen at the slaughter plant, will tell that tale.

“The only way we’re going to grow a herd is seeing more heifers and slowing the cow kill down.”

However, we are past the big liquidation years post-2005, Wasko added. “In the last four or five years, we’ve been in a kind of consolidation phase, where we’ve been just kind of dropping numbers a per cent a year.”

But it’s a different story south of the border. There have been significant improvements in moisture conditions in the U.S. this past year, leading analysts to anticipate the soon-to-be released U.S. cattle inventory to show Americans are now in an expansion phase.

The rains have returned, and the cows are coming back with them, said Wasko, noting that 20-year data kept on U.S. pasture conditions showed at November 1, 2014 pastures were the best they’ve been in two decades. That’s the exact opposite of 2012, when they were at their worst.

“Three-quarters of the U.S. cow herd saw great moisture conditions in 2014,” she said. “That’s why they have already moved into what we believe is expansion phase.”

Wasko said there continues to be tight supplies on the beef side of the equation, and demand for beef is also expected to stay strong. But the question arising through 2015 will be how it will hold up as more pork and poultry eventually come on the market.

Right now, the USDA is forecasting U.S. pork production up four and five per cent in 2015 as the declines from the PED virus are made up. There is a similar percentage increase in annual broiler production too.

“Retail pork prices are under lots of pressure. Even though pork supplies aren’t really larger today, the industry is pretty confident they’ll be larger by summertime and possibly larger after that,” she said.

“Those things are making the big differences as we go forward into 2015.”

Overall, the year ahead for cattle producers looks to be one of trading ups and downs, and more volatility, she said. Last year was all about moving from one price range to another.

“2015 is going to be about finding our range,” Wasko said, adding producers should be prepared for some big swings.

“2014 was moving us up out of one price range to another. Now we’ve got there. Now I think we find a bit of trading range within this area.”

About the author

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Lorraine Stevenson

Lorraine Stevenson is a reporter and photographer for the Manitoba Co-operator with 25 years experience writing news and features. She was previously a reporter with the Farmers Independent Weekly and has also written for community newspapers in Winnipeg and Manitoba's Interlake.

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