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Exports continue to support livestock markets

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Cattle and hog markets have experienced lower numbers during 2016, but Iowa State University Extension livestock economist Lee Schulz said the markets are still near the five-year average.

“We had historic highs in 2014 and 2015, I thought a year ago that 2016 would still see greater profits. We’ve seen profits go down, which is expected to be the trend in 2017, but it’s still not the worst we’ve seen,” said Schulz during the Pro-Ag seminar in Greenfield, Iowa, Dec. 5.

Retaining heifers for rebuilding the cowherd has happened more quickly than was expected, but Schulz said the cow numbers aren’t back to the high seen prior to the droughts. The rebuilding has led to larger beef supplies, which has put pressure on the market prices.

“We had the largest calf crop in 2016 since 2010, but the lower prices has definitely slowed or even stopped any further expansion of the cowherd. The Midwest cowherd is young and productive,” said Schulz. “Feedlots are in a better place today than they were a year ago, but they are still experiencing some red ink.”

In 2015, cattle producers saw one of the fastest declines in calf prices ever seen. In 2016, feeder prices have continued to be low, but are still at the five-year average.

The Midwest and High Plains producers have recovered from the drought of 2012, but now the Southeast states are seeing severe drought and are selling calves and culling cows at a higher rate. These calves are being placed in feedlots in the Midwest and High Plains, which is helping build back the feedlot industry.

Slaughter cow prices have been the lowest through the fall months, Schulz said it may be better to hold over cull cows for better prices in the spring. Cow slaughter numbers are up 13 percent in 2016. Schulz said producers have become better at culling cows because of disposition, breeding or structural issues, thus making the cowherd younger and more productive.

The number of heifers on feed increased in 2016 over the low the last few years during the cowherd expansion and while feeder cattle prices were lower.

“Recent placement numbers are down. It seems that cow-calf producers are holding calves with hopes of better profits,” said Schulz. “While cattle on feed numbers are lower than a year ago, it’s still higher than the five-year average. From February until June of 2017, we expect to see close to break even or even above break even on fed cattle prices.”

Beef exports continue to support higher prices. Schulz said this plus a decrease of beef imports into the United States will help bring beef prices back up.

Pork demand continues to be the driver for the pork markets. Processing capacity has been squeezed, but is expected to get better when new pork processing plants come on line.

Lower hog and pig prices have slowed expansion also. An expansion was driven by the prices in 2014, the lows in expansion and returns have been seen in 2016 and will continue into 2017. Schulz said estimates show four months in 2017 to be profitable for pork producers.

An increase isn’t always seen in the number of sows farrowed. Production increases and an increase in pigs per litter have been a driver in the increase of pigs on feed. Live hog imports from Canada continue to be high and have increase pork production.

“The additional slaughter plants should help ease the slaughter capacity, but it will be important to not over expand the hog herd,” said Schulz.

The biggest area for growth of pork exports to help with pork prices is in Japan and Mexico. Increase of exports to these areas will help with U.S. profitabilities in the pork sector.

“Trade agreements may not have a huge impact on livestock prices in the short term, but livestock producers will definitely see an impact over the long term,” said Schulz.

Jennifer Carrico can be reached at 515-833-2120 or jcarrico@hpj.com.

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