Demand is 'bright' in 2019 for livestock producers
The livestock markets faced some headwinds in 2018 including near to record supplies of all meats and trade tariffs, which limited exports of pork.
Tim Petry, North Dakota State University livestock market economist, doesn't see supplies easing in 2019. "No, in fact, we're going to go up," he says.
"We've been doing record pork and poultry production for the last four years and that's going to continue," Petry says. "Hog numbers are up, breeding numbers are up 2.5-percent. So, the handwriting is on the wall for record meat supplies again in 2019. Bryan Strommen, market analyst with Progressive Ag of Fargo, doesn't believe the cattle market is past the so-called, "wall of cattle" and that supply will be an issue for the next six months. He says looking at the last three Cattle on Feed Reports, placements have been down, "But the on feed numbers are higher than they have been for quite some time." Plus, he says cow slaughter is up 10-percent and dairy slaughter is up 4.5-percent. Both agree the demand picture is very bright for 2019 after record beef exports during the year. "The good news is we've been doing the record beef exports for the last several months and that is the expectation for 2019," Petry says.
The one caveat is the U.S. Mexico Canada Agreement has not been ratified by Congress and the U.S. is dependent on Canada and Mexico as top customers for U.S. beef and pork. Strommen says he is also watching the disposable income with the volatility in the stock market. "I think when you look at the general economy, we see a lot of volatility in the Dow. For December, it will be the worst performance since 1931."
He says that may be being offset with lower crude oil prices, which help lower gas prices at the pump and provide more disposable income for consumers. As far as marketing advice, Petry says the live cattle and feeder cattle futures prices are at about the same level the cash was last year. "So, producers look at that and say, 'OK, everything is fine, with the same prices, but there are many headwinds such as the economy, trade and the weather."
He says that makes it tougher to pre-price, especially in cow-calf operations. However, he suggests utilizing the same risk management strategies producers used in 2018 to protect against market volatility. Strommen says there are various tools to protect prices and deal with increased volatility. "You have the future, there's the LRP (Livestock Range and Pasture) program for beef cow producers or they can use options to protect risk, especially on the new calf crop."