The combination of the recharge in feed grains and hay stocks, along with the prices that calves are bringing this year, is just the right set of scenarios to see a recovery in the beef industry.
“With this change in paradigm between feed costs and positive closeouts in the fed cattle markets, guys are starting to pay a bit more attention to their barns than their fields again, and it’s about time,” said Don Close, Senior Analyst with Rabo AgriFinance.
Close says he expects the Jan. 1 inventory report to have a small decline, but 2014 will clearly see some growth.
“If you take a look at the all-time record cattle numbers in 1973 and 1974 of 139 million head, we’ve steadily eroded to the 89 million head this past January,” Close said. “Given the size of the animals and the increase yield that we have today, if we were to see an increase of 3 to 5 million head over the next 3 to 5 years, that would be a significant number when you consider what our production capability is today.”
It is no secret that the American beef producers deliver a product that is second to none, and close says many other countries are taking note of that as well as the demand for protein in the booming middle class grows.
“It’s just crazy that no matter where I go the single conversation is China, their urbanization and the demand to feed 1.3 billion people,” Close said. “Australian exports of beef this year to China is up by 800% and that is changing the dynamics and trade flows of beef.”
Along with the decline in numbers in the U.S. herds there have also been some recent contractions of numbers in Australia. On a worldwide scale Brazil is the only location that is seeing measurable growth. That tight supply of beef is going to be a world issue for several years. That means, according to Close, that the long-term outlook for world trade of beef is extremely optimistic.