Cattle-Fax Outlook Seminar

With standing room only and over 900 attendees happy to make brisk start to their day there was clearly an expectation that the seminar would be provide valuable insight.

In addition to excellent the organisation of the Cattle-Fax team, who were supported by Purina and Pfizer, the standard of presentation and the quality of information was high throughout the seminar which effectively reviewed and summarised the key factors that would be affecting the economics of production going forward. The two hour seminar was packed with valuable information and we have picked out some key points that grabbed our attention.

Weather & drought

Dr Art Douglas Creighton University - The good news is that expectation of near normal precipitation in Midwest will favour normal planting schedules in 2007 - a year where low stocks and high demand mean that achieving a good corn harvest could not be more critical. However the bad news is that the sea temperature patterns that have been prominent since 1998 and have played a role in both the prevailing widespread drought in the US and the strong hurricane years in the Gulf/Atlantic states look set to continue, and could dominate weather patterns through the winter of 2007-8.

Markets

• Randy Blach - Exec VP - Cattle-Fax
• Kevin Good - Senior Market Analyst - Cattle-Fax
• Mike Murphy - Analyst - Cattle-Fax
• Brett Stuart - Research & Analysis Global Markets - Cattle-Fax

Cattle Inventory & production rising slowly

The current cycle of cattle numbers hit its low at 94.88 million in 2004 and since then numbers have been increasing up 2.7 million over the last three years. The total inventory for 2007 is expected to be up again by 0.5% at 97.6 million.

Cow slaughter at 5.43 million was up by 575,000 head (12%) largely driven by the culling in the southern plains as a result of drought. However feeder cattle and calf supplies are nonetheless expected to be up around 2% at 28.75 million year on year with imports from Canada and Mexico projected to be slightly down year on year.

Overall beef production is projected to rise by over 1% from 26.053 billion pounds (11.79 billion kg) to 26.4 billion (11.95 billion kg) and net beef supply is also projected to rise 0.5% to 28.1 billion pounds (12.71 billion kg).

Price & demand

With per capita consumption level or declining slightly, the per capita spending is trending gently down since the peak of almost $240 in 2004, and with the increase in population not offsetting all the growth in supply retail demand is down by around 1%. With these factors in mind the US price is projected to soften slightly during 2007 to average close to $85-95/cwt (fed steers). Although an upturn in exports, particularly to Asia, is built into this price projection it is possible that if exports are significantly up on estimate then the price will hold up better.

Reflecting the increase in corn and raw material costs (resulting in negative cattle feeding margins), and the decline in beef prices then Bred cow (-$100), calf (-$15-20) and feeder prices are also trending down.

Global situation

Beef production is projected to continue to grow in the major producing countries, the US, Brazil and China but will remain steady or declining in a number of the other key regions including the EU, Australia, Argentina and Canada. The effect of ethanol on corn prices and therefore beef production globally will not be clear for some time yet and cannot yet be fully factored into the long term projections. Imports/export projections may also be significantly impacted by an long term commodity bull market.

Global consumption continues to rise with significant growth occurring in those regions where production is also rising, this is particularly noteworthy in China and Brazil. The growth in consumption is the US continues but is entirely fuelled by population growth.

Brazil and Australia remain the largest global exporters of beef with the decline in exports from Argentina and Canada set to continue. The US has the fastest growth in exports and should some of the key markets (S.Korea, Japan, EU) again become fully open to US beef then the current market conditions suggest that a substantial turn around would be possible.

Beef Industry Issue Forums

This year's industry forums were again sponsored by Pfizer Animal Health, and the five seminars covered important topical issues including: preparedness for Foot and Mouth disease, BioEnergy and the impact of this new competitor for raw materials, preparations for the national ID system, the Beef Checkoff task force recommendations, and a detailed review of the fast growing market for Natural/organic beef.

Mel Coleman Jr

The standard of these forums was very high each giving valuable insight into the issue being addressed, The Natural/Organic forum proved to be particularly worthwhile with an excellent and very practical paper by Mel Coleman Jr of Coleman Natural Foods explaining how and why his father and he took the family business into Natural production and the tremendous success that has been achieved as a result. Mel made the point that this business responds to a growing demand for the highest quality in meat production and that this sector of the market is not only growing rapidly but also provides higher margins and greater stability. Mel also discussed the need for good quality auditing system to demonstrate and protect the integrity of the brand.

Chris Arnold PR Director of Chipotle Mexican Grill also gave a highly thought provoking paper showing how his company's highly successful work with Organic and Natural products in their restaurants has in fact been very strongly customer led. Chris chose the transformation of individual recipe items to demonstrate the strength of demand for high quality Natural and Organic food ingredients and to show that the improved eating experience was immediately recognised by customers directly resulting in sharply increased business.

Chris also made the point that product integrity and customer trust is essential, "Clear messages about improved products, supported by robust auditing systems are an essential part of the continued growth and success of this exciting new business sector" he said. Chris Arnold is an MBA graduate from the University of Denver and is seen as one the key voices in the communications arena of the US food industry.

TheCattleSite Team