Future of Livestock Market

(Jamie) Welcome back to Farm Factor. Let’s join Kyle and Randy again as they look to the future of the livestock marketplace.
(Kyle) Hi this is Kyle Bauer continuing to visit with Randy Blach. Randy is the CEO of CattleFax. Randy in the prior segment we talked about kind of what has happened in the years prior as we’ve come through 2015, which in the cattle market has been really tough for the feeder people or for the people feeding cattle. What do we look at coming into this next year? (Randy) Well, I think as you sit back and you look at the macro landscape, one of the big changes that we’ve seen over the last eighteen months has been the strength in the dollar. So, the dollar has been strong. It’s been strong against other currencies. So the purchasing power of other countries around the world, for their ability to be able to purchase U.S. beef, pork or poultry has been diminished. When we look at 2016, you look at interest rates increasing. You look at the slow down in economies around the world, compared to the U.S., the U.S. is still the best game in town isn’t it? So, that tells you that the dollar is likely to stay firm all the way through 2016. I don’t think we should expect a lot of weakness in the dollar which would just say to you that while exports can improve, we wouldn’t expect them to be outstanding. We’re anticipating a four to five percent increase in beef, pork and poultry exports in 2016, which will be a big help. And this year was the big increase in production. So, pork production was up eight percent in 2015. It will be up one to two percent in 2016. Poultry production was up five percent in 2015. We’re anticipating it will be up one to one and a half percent in 2016. When we look at beef, beef production or beef supplies were basically flat in 2015. They’ll be up between four and five percent. So, still record large total meat supplies in the U.S., but better export picture than what we’ve had in 2015. (Kyle) Looking longer out there though, we came through a time in agriculture when we were exporting 20 to 30 percent of almost every commodity that we had and that was great for our pricing. But as the dollar has strengthened and as you mentioned, the dollar will probably stay strong, can we look at probably exports not being strong for the next few years? (Randy) Well, I think when you go through the adjustment, it’s not just the currency, we have to remember that those wholesale prices are changing underneath the structure of the dollar. So, what I mean by that is think about the hog market one year ago. The hog market a year ago was 50 to 60 percent higher than it is today. So, if we go back to July of 2014, we were selling hogs at 120 to 130. Now they’ve had a 60 percent correction in price. A number of our poultry items are off 40 to 50 percent, compared to their highs of two years ago. Beef items, we’d have cuts that would be 30 to 35 percent cheaper. So, even though the dollar has appreciated 15 percent, those wholesale values are off-setting some of the appreciation in the dollar. So, we’ll get some better traction in those global marketplaces but we all have to remember one basic thing, when prices go to record high levels why are they doing that? They’re rationing a very small supply. There wasn’t enough supply when we came through the perfect storm in 2014 of beef, pork and poultry. Now, we’ve got very adequate, abundant supplies in here when we go through the slow down in the global market. So, that’s part of the transition that we go through when we actually get into these global trades. (Kyle) We’re visiting with Randy Blach. This is Kyle Bauer reporting. Back to you Jamie.
(Jamie) Thanks, Kyle. OK, it’s time to grab a cup of coffee, but don’t go far away – next is this week’s Kansas Soybean Update.

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