The United States has seen exceptional years for beef exports in 2013 and 2014. After two record setting years, this year has been challenging. Oklahoma State University Extension Livestock Marketing Specialist Derrell Peel said exports continue to struggle for a variety of reasons. The west coast labor strike impacted exports for the first half of the year, in logistically moving product out of the country. In having record high prices, Peel said that is being aggravated by a strong U.S. dollar, which is making U.S. products more expensive. On the other side, he said the strong dollar is also making foreign beef imports more favorable.
“We got high prices and relative shortages of certain products in the U.S. and so we’re seeing a significant increase in beef imports last year and again this year,” Peel said.
After several strong years for beef byproducts, that category has also been effected by the strong U.S. dollar. Peel said this impacts packers first and most directly.
“They’ve been losing $30 to $40 a head in revenue, which is a big part of the gross revenue margin to work with,” Peel said. “Recently, we finally have seen those byproduct values appear to have bottomed out. They have recovered a little bit in the last two, three weeks, but its significantly lower level than we had for about three or four years prior to that. So, it’s been a real challenge and its certainty another indicator of some of those issues in the global markets.”
Feedlots continue to bear the brunt of this margin squeeze. Peel said 2015 is shaping up to be potentially the worst year for feedlots. That’s on an average basis in terms of an annual budget series. Peel said feedlots are caught in the middle.
“They continue to be caught with still high feeder cattle prices, even though feed prices have moderated and that’s not been the problem, they’re just caught in this squeeze between feeder cattle prices and the fed cattle prices and it’s really not likely to go away for several more months.”
In the yearling and stocker market, prices have come down, but the outlook remains unclear. Peel said it’s hard to have a gauge where stocker calf prices will be this fall, as well as what producers can expect in terms of prices for feeder cattle next spring.
“If you look at the current price relationships, it’s actually is fairly attractive,” Peel said. “If you look at the buy - sell margin on yearlings given today’s prices, the value of gain is actually very good and it’s actually gotten better with the price drops we’ve seen just in the last week or two, because the drop has been bigger on the calf side, then it has been on the feeder cattle side.”