Last week I recorded a segment on Farm and Family Radio with Amy Myers to discuss the 2018 Cattle Market Outlook (listen to the radio segment HERE). I thought the transcript of that conversation would be of interest to readers of this newsletter, too – so here it is!
Amy: Today, we’re speaking with Josh Maples, Mississippi State University Livestock Extension Economist. Dr. Maples, first off, tell us a little bit about what all information you consider when studying the cattle market.
Josh: Thanks for having me Amy. The cattle market is a fascinating combination of many different factors and understanding how these factors impact prices is important when forecasting what prices might be in the future. We are operating in a global environment where the amount of U.S. beef consumed in countries around the world can have real impacts on the prices we receive for our calves here in Mississippi. We’re really just trying to estimate supply and demand. But each of those include many aspects of our industry.
Amy: What are some of the most important factors in our industry right now?
Josh: As we end this year and move into 2018, there are a few big storylines that are impacting expectations for our markets as we move forward. The first is increasing cattle and beef production, the second is total meat production, and the third is international trade. These are probably the three most important aspects of our industry right now in terms of forecasting market prices.
Amy: You mentioned increased production. What is happening and how will it impact cattle prices moving forward?
Josh: We’ve been pretty rapidly expanding the herd in the U.S. over the past three years. Producers have retained more heifers and more calves have been born each of the past three years. Larger supplies of calves are turning into increased beef production. The number of cattle processed is six percent higher in 2017 than it was during 2016. With a larger calf crop on the ground this year, too, the number of cattle processed next year will also be larger. This means beef production is increasing. Increasing production means we either have to increase the number of consumers, or current consumers will have to eat more beef. Generally, increasing consumption across the same number of people requires lower prices.
Amy: What about total meat production?
Josh: It’s not just beef production that is increasing. Poultry and pork production are also increasing at the same time. Pork and poultry are competing meats at the grocery store. The price of those meats impacts the amount of beef purchased. For 2018, we’re forecasting about 215 pounds of meat disappearance per person in the U.S. That’s the largest since 2008.
Amy: That is a lot of meat! What is going on with international trade?
Josh: Increased exports of U.S. beef have been an extremely positive storyline of 2017. We have increased exports by about 14 percent over 2016 levels. This is much higher than most expected and it has provided some support to prices. Anytime that we can find new customers for beef, that supports beef and cattle prices because it offsets some of the supply increase. Exports to our largest trading partner, Japan, have been exceptionally strong. Exports to Japan are up nearly 30 percent above 2016 levels.
Amy: Tying all of this together, what does the market look like for 2018.
Josh: 2018 will likely bring slightly lower calf prices for producers in Mississippi, on average. Right now, I’m forecasting prices to be about $5 per hundred weight lower than they have been last year for 500 to 600 pound Mississippi calves. That would put the Mississippi average around $145 for those calves. Now this doesn’t mean prices will be lower all year long – that is my forecast for the 2018 average compared to the 2017 average. There will likely be some opportunities for stronger prices throughout the year.
Amy: Can the factors you mentioned above impact this forecast?
Josh: Absolutely. For example, a primary reason prices have been stronger in 2017 than we forecasted this time last year is that exports have exceeded expectations. My forecast for 2018 uses a more “normal” expectation about growth in exports for 2018. If we grow another 14 percent next year, that will certainly provide some support for prices above what I’ve forecasted. However, we know that supplies are going to be larger in 2018. So the upside to be surprised will likely have to come from stronger than expected demand both domestically and internationally.
Amy: Thanks so much. Today, we’ve been speaking with Livestock Extension Economist Josh Maples. I’m Amy Myers, and this has been Farm & Family. Have a great day!