Agricultural News
CattleFax CEO Randy Blach Predicts Ongoing Expansion in Cow/Calf Segment will Shrink Profitability
Tue, 28 Nov 2017 14:25:30 CST
As the beef industry is building supply, so are its competitors.
"We expect the cow herd is going to grow again; we will be up another seven- hundred-thousand head, maybe eight-hundred-thousand head on January one," said Randy Blach, CattleFax president. "So, the trend of increasing supply, more numbers to harvest, more production not only of beef but also of pork and poultry-there's going to be a lot of protein on the market."
To watch a video clip featuring Randy Blach, CattleFax president, sharing how expansion will impact profitability for different beef community sectors, click or tap the PLAYBOX in the window below.
Blach says that presents a good-news/bad-news story for beef producers.
"The cattle markets got pretty hot in 2014-15, and we all understand that wasn't sustainable with the price increases that we went through," Blach said. "Supplies have increased and prices have corrected back into levels that I think are much more comfortable, I don't think our markets have a lot more down but ease lower here over the course of a couple years. One of the things that I think we are going to see is retailers and foodservice operations are going to have good margins. So, I think we will see great featuring actives. They are going to have the margin incentive to feature beef on a regular basis as we finish 2017, go into 2018, so I think that's a real positive thing for our industry."
In the last decade, Choice and Prime grading increased from 50% to nearly 80% of fed cattle, and Certified Angus Beef brand sales have moved from 500 million pounds to more than a billion annually.
"In spite of that increase we are maintaining premiums. The premiums we're holding have actually been big for Choice-Select spread or the CAB-Choice spread, or the Prime to Choice spread," he explained. "So, that tells you the market wants more quality beef. And consumers are willing to pay for it. That's the message I think that's really clear in the data that we look at and analyze on a regular basis."
As all protein supplies increase, it will put pressure on the industry to keep building demand outside our borders.
"We've got a lot of consumers that love the product here in the U.S. but we only have four percent of the world's population," Blach continued. "And as more and more consumers around the world see their incomes rise, there's a huge opportunity for the U.S. beef industry to continue to export more quantities of this high-quality protein to consumers, whether it be in China or Hong Kong, or Japan or South Korea, the list goes on and on and on. So, I see wonderful opportunities to continue to expand that footprint globally.
In the meantime, Blach suggests cow-calf producers here watch expenditures and focus on improvements that add to their bottom line. Profitability will shrink in the near-term, he says.
Source - Certified Angus Beef
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