Trade, weather will have big consequences for prices
BISMARCK, N.D. — Tim Petry is tired of the word "record," because when it comes to livestock markets and production, "we are constantly setting records."
Petry, livestock economist at North Dakota State University, spoke along with his NDSU crop economist counterpart Frayne Olson during the Farming and Ranching for the Bottom Line conference held at Bismarck State College on Feb. 27. The two gave the crowd of more than 200 a look at the price outlooks for their respective areas of expertise.
Cattle had record-high prices in 2014. Pork and poultry had record years following that.
Beef production dipped in 2015 when heifers and cows were held back from the market to help build herd numbers.
"This year, we will have record beef production," Petry said, adding that prices have stayed up. "Demand has to be good for that to happen."
Prices haven't only stayed up, Petry said.
"We're back to more ... of a predictable market," he explained.
There are some wildcards going forward, though, Petry said. For one thing, drought and feed supplies and cost are immediate concerns for people in the region. But a big, worldwide concern is trade. Another record for 2017 was the U.S. hitting an all-time high for beef exports.
"We are the most important player in the world meat market," explained Petry, pointing out that the U.S. is both the leading producer and the leading exporter.
Negotiations into the North American Free Trade Agreement continue, but that's not the only trade concern, he said. The Trans Pacific Partnership continued without the U.S., and through that agreement Japan will greatly lower tariffs on beef for participating countries.
"We need to get that going to preserve that market," Petry said of trade negotiations with Japan.
Additional negotiations with South Korea also are important, he said.
Looking toward fall calf sales, Petry expects prices to be off about 7 to 10 percent from last year. The cow market likely will be similar to last year.
"They're not going to go sky high," he said.
Backgrounding calves will, as in most years, be a good option for producers this fall, as long as there is feed for it, Petry said.
"Let's pray for rain in the meantime," he said.
Crop price outlook
Olson said there are two things to focus on in the corn market: how fast supply is moving to the export market and the weather in South America.
In the export market, sales have been good but not great, he said. And crop conditions in South America, where Argentina has seen dry conditions, also will be consequential for U.S. growers.
"The corn market has been responding," Olson said.
It's a similar story in soybeans, though the difference is that Argentina is not a big player in the soybean export market, tending to crush more of their own beans. However, recent improved prices have made Olson wonder why more people aren't selling what they have in the bin or contracting for November.
"If you've got soybeans in the bin, what are you waiting for?" he asked.
Wheat, too, has seen good but not outstanding export sales. Wheat acres continue to be at their lowest level, but it'll take a major weather problem to influence the wheat market because of existing supplies, Olson said.
Like the cattle markets, trade will continue to be a big deal for crops. Olson said the lowering of wheat tariffs are expected to give Australia and Canada a $1.77 per bushel advantage in selling to Japan. And pulling out of NAFTA could have big consequences for most commodities.
Olson thinks the U.S. ultimately will stay in NAFTA, but not without a lot of turmoil throughout the process. However, if the U.S. pulls out of NAFTA, "man, hang onto your hat," Olson said. "This could get nasty."