The expansion cycle in the cattle markets can tend to be a bit of a rollercoaster, and it’s not always easy to tell where we are at on that ride.
Don Close, animal protein analyst with Rabobank, says in his opinion, the current US cattle market is still on the upward rise.
“We think we are still expanding. Not nearly as fast as we might have for the past two to three years, but we are looking for very metered growth, certainly for the remainder of this year, and probably for 2018,” explains Close to RealAgriculture’s Kelvin Heppner at the Canadian Beef Industry Conference. “It’s not until we get into 2019-2020 before we see the cycle high in this go-around.”
The biggest factors that contribute to this happening is low feed grain prices, as well as growth potential in exports.
“We can’t grow cattle numbers, or livestock numbers appreciatively with total dependance on domestic consumption,” says Close. “So we see the US finally becoming a net export of beef, and think that by itself will have ramifications in markets globally.”
Close adds that China is a huge part of this target, but it’s important to remember they aren’t the whole target.
“We’ve had a phenomenal year with Japan; the US has had an exceptional year with Korea, and so it’s that whole Southeast Asia complex — with China — that we see the real growth opportunity,” says Close. “We also see the ramifications of particularly the discriminating taste of a lot of those consumers in that portion of the world, we see the demand for high quality beef really getting a shot in the arm. And as a result of that — the price spread between high quality or ultra high quality beef, and what we would refer to in the international market as grinding beef, or manufacturing beef — we think the price spread between those two markets could widen quite significantly.”
This puts North America in a good spot, says Close, as a provider for highly marbled, high quality eating product.
To learn more about the global cattle herd, demand for beef, the impact of NAFTA, and what will happen after 2019-2020, check out the conversation between Kelvin and Don Close filmed at CBIC in Calgary, AB: