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Four big factors you’re facing in 2019

Published on 21 December 2018

The good times didn’t always roll in 2018, but there was some nice music playing in the background. Prices were relatively stable on many commodities, production of beef escalated throughout the year, and demand held steady while energy prices began to taper off toward winter.

Not a bad mood as we end the year, right?

But that’s not to say there aren’t several issues to keep an eye on as 2019 dawns. Economists are sending some mixed messages – some still riding the wave of optimism, others seeing darker clouds– so there’s wisdom in following the key issues on the beef producer’s radar.

  • A booming beef supply – Production is taking off at this stage of the expansion cycle. The first week of December saw 667,000 head slaughtered, the biggest total since fall of 2003. And the calves are expected to keep coming. CattleFax projects a jump of 200,000 more beef cows in the Jan. 1 USDA count and a calf crop in 2018 going up 1 percent to 36.2 million head.

How will that increased supply of calves affect tightened feedyard access? And how far will the downward pressure on prices be, especially if swine and poultry also increase productivity?

  • Foreign market access – That booming supply of beef has to go somewhere. So even with healthy demand in the U.S. market, we’ll need trade access, and no market is bigger this year than Asia. Japan continues to push demand higher for U.S. beef, and trade officials want President Trump to get a stronger deal in place with that country. Beef and pork exports bring in $3.5 billion from Japan, and the demand is getting stronger. But countries that signed the Trans-Pacific Partnership, including Australia, Mexico, Canada and New Zealand, will get more relief from tariffs as they sell to Japan. A deal has to happen soon to level the playing field.

Soybeans give way to corn

The China trade war has taken a hit on soybeans, so expect corn plantings to escalate higher this spring, at least well above the 89.1 million acres used last spring. That acreage will be needed as those protein supplies keep building from beef, poultry and pork.

Meanwhile, the hay acreage, according to CattleFax, should remain as small as it was in the past two years. The key element here will be the weather and if El Niño can bring the needed moisture to preserve the crop.

Uncertainty of the R-word

There is a growing sense from economists a slowdown may arise sometime in late 2019 or early 2020, sparked by fears of another housing decline, trade war aftermath and continuing escalation of interest rates as the Fed holds down inflation.

No one likes keeping their sights locked on the stock market, but volatility in several sectors does portend trouble for the consumer and labor market, should it continue. And many expect it to do just that.

So Happy New Year to you, and buckle in for the ride.  end mark

David Cooper
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