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‘2018 Should be a Profitable Year’

By Kindra Gordon   |  
02/05/2018

CattleFax CEO Randy Blach provided a big-picture view of the cattle industry market outlook for those attending the 2018 Cattle Industry Convention & NCBA Trade Show in Phoenix, Ariz., Jan. 31-Feb. 2. Of the beef industry’s current status, Blach reported, “2017 was the second best in history [for profitability]. Every sector made money through the chain. 2018 won’t be as good, but it still should be a profitable year in total.”

Cow-calf profits have averaged $165 per head from 1998 to 2018, Blach noted, sharing historical data. “If we can continue to grow demand domestically and globally, we’ll be in good shape.”

That said, Blach encouraged producers to “remember where we came from.” He pointed out that beef demand dropped 50% from 1980 to 1998. As a result of that declining consumer demand, cow-calf profitability during that two-decade period averaged $2.04 per head.

“Where would our industry be today had these issues [of declining demand] not been addressed?” he asked. Blach credited beef industry leadership with listening to consumers’ requests for high-quality beef. As a result of delivering higher-quality product, he said, “We’ve seen demand pick up, and what we’ve experienced in the last 15-20 years is phenomenal.”

Looking ahead to 2018, Blach and his CattleFax team are monitoring the record-large beef supplies in the United States — and the impact that could have in the marketplace. Blach shared that 2018 beef production will be the largest ever, and supplies will continue to build through 2020.

“When you add pork and poultry [supplies] to that, we’ll have plenty of everything,” he noted. Specifically, meat supplies are expected to top 102.2 billion pounds (lb.) in 2018. For comparison, supplies in 2016 were 96.4 billion pounds.

Blach remains optimistic and said, “The global marketplace wants what we have. … Demand is going to have to be good because protein levels will continue to build.”

He said the current tax bill as well as global growth in the GDP and global markets should help fuel meat demand. “These are promising because more jingle in people’s pockets helps to pay for our product,” Blach said.

In addition to consumer demand, trade access will also be critical, Blach emphasized. “We do have to have a level playing field, and we do have to have access. …We have to see these export markets continue to grow. We will need to see record exports to keep supplies from overwhelming the market.”

He also shared, “If we didn’t trade, we would need to consume 40 more pounds of protein per person [in the United States]. That’s why we need trade.”

Manage risk

Going forward, Blach encouraged those in the industry to recognize the volatility in the market and seek risk management strategies to combat it. He shared that the range in prices from high to low over the last three years is about $40 per hundredweight (cwt.) or $550 per head, with swings of $14 to $18 in two- to three-week periods not uncommon.

“We think this volatility is going to continue,” he said. “These equity swings have been unprecedented and the reason risk management activity has increased.”

Blach added, “We are going to need to be a more risk-managed business. …We need to because the amount of money and capital it takes in our business is absolutely staggering.”

On the horizion, Blach suggested issues the industry must continue to monitor that could affect the market include harvest capacity bottlenecks, increasing offerings of plant and insect based proteins, and livestock traceability. Of this last item, Blach noted, “Traceability will be important if we want to have access. Our industry needs to address this. We don’t want to let it get away.”

In closing, Blach reminded producers of this sentiment: The speed of change will never be slower than it is today. “That’s spot on,” he said, but added, “There will be opportunities galore as the market differentiates.”

CattleFax, which marked its 50th anniversary in 2018, is currently collecting data for a cow-calf survey from producers across the country; access the survey link here.

Editor’s Note: Kindra Gordon is a freelance writer and cattleman Whitewood, S.D. This article was written as part of Angus Media’s coverage of the 2018 Cattle Industry Convention in Phoenix, Ariz. Jan. 29-Feb. 2. See additional coverage in future issues of the Angus Journal and the Angus Beef Bulletin and online at www.angus.org.