Rabobank's Don Close Says 2014 Full of Challenges, Promise for U.S. Beef ProducersFri, 15 Nov 2013 14:44:01 CST
As 2013 draws to a close, all eyes begin to turn toward 2014. Don Close, vice president of food and agribusiness research with Rabobank, has been looking at the trends and sees a lot of issues on the horizon which will affect U.S. beef producers both positively and negatively in the coming year. He spoke with Ron Hays at the recent National Association of Farm Broadcasters meeting in Kansas City, Missouri. (You can hear the full interview by clicking on the LISTEN BAR at the bottom of this story.)
Domestically, one of the first hurdles to clear, Close said, is the withdrawal of Zilmax from the market. He said the effects of that withdrawal which began in September are remarkable. There has been a surge in cattle grading choice and prime and a decline in the live weight to carcass weight yield. He said he hopes there is a quick resolution to the problem.
“I have expectations that the product will be back. I think that world supplies of protein are so tight that we’re just ultimately going to be forced to look at all potential technologies.”
He said the beef industry will have to decide in the long run whether it is shooting for ultimate quality in its product or raw tonnage. That will dictate the importance of products like Zilmax which weight the scale toward higher yielding carcasses.
Currently, prices in the cattle markets are staying high. Close said that is simply a function of shrinking cattle numbers and increasing worldwide demand for beef. As more Asians develop a taste for beef, Close says the chances that beef prices will remain high in the future are good.
“A combination of so few cattle, the other is we’re seeing unprecedented world demand not only beef, but all animal protein. And as the standard of living increases globally, it doesn’t matter what conversation you have on agriculture economics right now, that conversation is going to go, ‘What is China’s next move?’ And as long as that continues to be the case, I think that prices will be very good.”
He said that higher cattle prices, improvements in pasture and rangeland, and lower feed costs are all conspiring to send economic signals to producers that it is time to expand their herds.
Close said that producers are between a rock and a hard place right now regarding the decision on whether to send cull cows and heifers to market to take advantage of higher prices or to keep them in an attempt to get a bigger calf crop. He said how that decision is made, oftentimes, hinges on the age of the producer. And right now younger farmers and ranchers are becoming more and more dominant in the overall mix.
“I think that part of this price resurgence that we’re seeing is finally attracting new participants onto the playing field and that’s good news.”
Taking advantage of the opportunity for higher prices in 2014 is clearly a function of getting Russia back on board and getting China online with U.S. beef exports, Close said.
“The protein demands and expected stability of trade relations with China-certainly we have this whole issue currently with the purchase of Smithfield Foods by Shuanghui and accelerated involvement in U.S. animal agriculture-will be a stabilizing force there, where the relationship with Russia, while it’s good, but it’s more on-again, off-again.”
He said the off-again issue currently with regard to Russia is the controversy over beta agonists. He said the question is how much of that is politically driven and how much of it is food-science driven.
Another issue on everybody’s mind is COOL. Some like it, some don’t. It’s a mixed bag. Stewart says whether the U.S. Congress settles the issue once and for all or the WTO does it, ultimately the U.S. needs to stand by its obligations under the WTO agreement.
Overall, for 2014, Close said, “I am so optimistic. As we’ve talked about, the combination of improving weather, the recharge of our feed grain supplies, the recharge of our forage and hay supplies are all cooperating for expansion. The price levels that we’ve discussed and the opportunities they bring, I think the stars are finally aligned.”
He says the burgeoning demand from China will keep supplies tight worldwide which will tend to keep prices high. The only challenge Stewart sees on the horizon over the next few years is the ability of pork and poultry producers to position themselves and take some market share from beef.
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