Blach Says Market Responding to Herd BuildingWed, 29 Oct 2014 11:45:57 CDT
One of the featured speakers at this year's Texas Cattle Feeders Association Annual Convention held this week in Oklahoma City was Cattle Fax CEO Randy Blach. He believes herd building is already underway. The US Department of Agriculture will release the next National Cattle Inventory report in January. Blach said it will show growth in several classes.
"Up about 300 thousand head on January 1 and we think up another three quarters of a million head a year from now if the current trend continues," Blach said.
That would put another million head back into the herd by January 2016. Blach said all systems are go right now and this is exactly what the beef industry needs.
"This is what we've needed, if we're going to support our feeding and packing infrastructures in this country, keep beef in the center of the plate, we have to respond to this economic signal as an industry now," Blach said.
Radio Oklahoma Network Farm Director Ron Hays interviewed Blach in Oklahoma City this week at the TCFA convention about the market outlook.
With a increasing number of heifers being held out of the market chain that is already impacting cattle prices. Blach said 90 percent lean beef prices have gone from under two dollars a pound a year ago at this time to three dollars of pound now.
"The market's job is to anticipate these things in advance of when we get there and that is what it is in the process of doing, so we're pricing the expansion, these tighter supplies over the next six to 12 months, the market's pricing most of that in now," Blach said.
With record prices there have been record profits for cowcalf producers. Blach said that won't be the case for margin operators into 2015 because the market has priced that into the replacement cattle cost for feeder cattle and calves. He said cowcalf producers will be in great shape, but for margin operators it's going to get pretty thin. In having record prices that has drastically increased the capital needed to be in the cattle business.
"Just in the last four years its a 89 percent increase in the amount of capital required to operate in this business environment," Blach said.
It's not just the beef segment, Blach said the same trend is going on with pork, poultry and dairy. All of the livestock segments are enjoying a time of record profits. A lot of that is driven by corn prices going from eight dollars a bushel and dropping back to three to four dollars a bushel. Blach said with the nation producing a record yielding corn crop that has been a big game changer.
After several tough years having good profitability was needed. Cattle feeders experienced a lot red ink in losing money with high grain costs for two years. Now with the market dynamics improving, Blach said producers need to be careful from this point forward.
The Beef Buzz is a regular feature heard on radio stations around the region on the Radio Oklahoma Network- but is also a regular audio feature found on this website as well. Click on the LISTEN BAR below for today's show- and check out our archives for older Beef Buzz shows covering the gamut of the beef cattle industry today.
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