U.S. net farm income—a measure of the sector’s profitability—is forecast to be $73.6 billion in 2015, down nearly 32 percent from 2014’s forecast of $108 billion. The 2015 forecast would be the lowest since 2009 and a drop of nearly 43 percent from the record high of $129 billion in 2013.
Since then, the combination of strong global demand, particularly in developing countries, and higher prices for farm commodities, has boosted agriculture’s share of all U.S. exports from a low of 6.6 percent in 2000 to an average of 9.1 percent during 2011-2013.
The price of 750-800-lb. feeder steers at the Oklahoma National Stockyards exceeded $220 per hundredweight at the end of 2014, up $65 since January and over $100 since May 2013. At the same time, the price of corn (a major component of cattle feed) fell from above $7.
“Although farm production expenses also increase beyond 2016, net farm income remains above its 2001-10 average,” the report stated. “Similarly, the value of U.S. agricultural exports falls in 2015 due to lower crop prices, but then rises over the rest of the projection period.
The most recent World Agricultural Supply and Demand Estimates (WASDE) report showed the effect of market drivers prompting expansion of protein supplies coupled with a strong currency that discourages export. The combination means there will be a lot more meat in 2015 that must be absorbed by the domestic market.
Only scant volumes of cash fed cattle had sold by Thursday afternoon last week. Prices were mostly $160 for live and $256 dressed, which was steady with the prior week. Analysts had predicted earlier on in the week steady trade would be the likely situation barring future implosions.
The Great Recession helped push down at-home food price inflation to just 0.5 percent in 2009 and 0.3 percent in 2010. Inflation was again higher than the 20-year average in 2011, reaching 4.8 percent. However, in 2014 retail food prices rose 2.4 percent, near the 20-year annual average of 2.
In December, beef export volume slipped 2 percent year-over-year to 100,270 mt, though value still increased 17 percent to $643.2 million. December pork export volume was down 5 percent to 183,498 mt, but value still achieved a slight increase to $541.3 million.
It’s a new world of cattle prices and some of the old rules of thumb that have been used for years need to be modified. I still hear folks talking about a $10/ cwt. slide for calf prices… the idea that calf prices should decrease by $10/ cwt. or 10 cents per pound as weight increases.
Cash fed sales were slow to develop, with market participants mostly playing wait and see with the futures, or else enjoying the temperatures down in Texas at the National Cattlemen’s Beef Association annual conference.