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Cattle Markets: Pray For NAFTA!

In the volatile feast-or-famine world of the cattle business, somebody usually makes money at the expense of somebody else. But not last year. 

For the beef industry, 2017 was unusual. Everybody made a little money – cow-calf, feedlots, and packers.

In fact, if you add up the collective profits, it was the second best year in industry history, behind 2014 (the year of $3 feeder cattle!). 

Don’t expect a repeat in 2018, said the beef market experts from CattleFax to ranchers and farmers at the Cattle Industry Convention held recently in Phoenix, Arizona. While they see another solid year for beef, the industry is in expansion mode at the same time as the pork and poultry industries are, too. Meat prices can only bear so much competition.

For all of 2018, Kevin Good of CattleFax says that beef production will be up 5%, pork up 5.1%, and poultry up 1.5%. That’s a lot of meat. 

“So far, exports have let us absorb these numbers,” said Good, adding that 16% of all meat is now exported, including 22% of pork, 16% of poultry, and 10% of beef. “If we lose our exports, that’s meat our domestic markets would have to handle.”

Nobody is predicting that, but there is much nervousness among beef industry leaders about President Trump’s threats to abandon NAFTA. With Mexico being our biggest market for beef, they prefer it stay as is. 

“Exports add $340 per head to the value of our industry,” said Randy Blach, the CEO of CattleFax.

Assuming NAFTA survives the current negotiations with only tweaks, CattleFax predicts that fed cattle will average $118/cwt in 2018; steer calves will average $160 (with $180 tops this spring); and cull cows will average $60. All of those are down a few ticks from last year.

Blach also reminds beef raisers of the volatility of cattle markets. Last year alone, the swings in fed cattle prices were $40/cwt from highs to lows. That’s $550 per head, he said, as he encouraged producers to use risk management marketing tools.

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