Last week we reviewed the top 20 stories in agriculture in 2016. This week, we take a look at the top stories in beef with the 2016 Beef Year in Review.
Cattle Futures and Cash Price Disconnect
Volatility in the cattle futures market reached a boiling point in 2016. While several explanations for the prices swings have been offered – including limited cash market information and high-frequency trading –no easy solution seems to exist. The December 2017 live-cattle future contract listing was delayed this summer while the cattle industry and CME Group worked to address concerns. While steps have been taken, the conversation will likely continue into 2017.
Prices Continues Lower
The latest USDA estimate is for lower cash receipts across the livestock sectors. Animal and animal product cash receipts in total were forecasted nearly 10% lower in 2016. More specifically, milk receipts are expected to be 3.6% lower while hogs are pegged at 6.5% lower. Conditions are a bit more difficult in cattle and calves as price declines are anticipated to push cash receipts 11% lower.
Cattle Herd Expansion Continues
In January the USDA reported the U.S. cattle herd expansion is still underway. Beef cattle were up 4% from January 2015 while the calf crop was estimated to be 2% higher. Looking ahead, many wonder how long the expansion trend will hold as lower price and diminished profits will begin to curb producers’ enthusiasm to continue with expansion plans.
Meat Consumption Higher
The latest consumption estimates show an upward trend in beef consumption for 2016 and 2017. This would reverse the decade long, downward trend per capita beef consumption. Furthermore, total red meat and poultry consumption is also expected to be higher in the U.S. Forecasted at nearly 215 lbs per capita in 2016, total red meat and poultry consumption will be at the highest levels since 2008, when consumption fell during the Great Recession.
China and U.S. Beef
With a growing appetite for beef, China announced it was removing a ban on U.S. beef in September. This ban went into place in 2003 after a case of Mad Cow disease was found in the U.S. There are a lot of details to be ironed out before cases of beef get loaded onto China-bound containers ships, but this announcement is a first – and critical– step in the U.S. and China resumed beef trade.
U.S. and Brazilian Beef
In other global trade news, the U.S. announced in August it was set to resume receiving fresh (chilled and frozen) beef import from Brazil. In October, the first shipment of frozen Brazilian beef arrived in Philadelphia. When thinking about the market implications of Brazilian beef imports coming to the U.S., it’s important to note that, as with U.S. beef exports to China, there are a lot of moving parts. A significant hurdle for Brazil is limited trade status with the U.S. and fresh beef being subject to quota limits.
Impressive Pasture Conditions
Across the Midwest and Great Plains, favorable growing conditions lead to strong pasture conditions during the summer and fall. While the U.S. Drought Monitor reported dry conditions in the West, Southeast, and Northeast, the middle of country enjoyed mostly favorable pasture and hay production in 2016.
More Pork than Expected
Indirectly impacting beef producers, the U.S. found itself with more hogs than expected in 2016 after the latest USDA inventory report. Modest increases in the breeding herd combined with large jumps in litter size left pork producers dealing with prices below break-even. Abundant pork supplies make for a competitive meat counter at the grocery store.
Interested in learning more? Follow the Agricultural Economic Insights’ Blog as we track and monitors these trends throughout the years. Also, follow AEI on Twitter and Facebook.
This post was originally featured in the December 2016 issue of Progressive Cattleman.
Photo Source: Flickr/USDA. “k5685-1”