Australian beef producers should expect continued flat prices if the philosophy that our market mirrors the United States with a two year lag holds true.
Wes Klett, the general manager of Anipro/Xtraformance Feeds in the United States was the guest speaker at the Livestock SA southern region members dinner at Penola last week.
The Texan gave a fascinating insight into the US beef supply chain, including their unprecedented run up of prices in 2014-15.
Mr Klett said it had been very dry in much of the cow-calf producing areas of Texas but was hopeful recent rain may have prevented a drought related sell off.
“Any liquidation now could be from a lack of profitability but I don’t think we will see a mass sell off due to drought,” he said
The United States Department of Agriculture is forecasting the US herd, which is already at its largest for eight years, to grow another 510,000 head for 2018 and another 250,000 head in 2019. It should plateau in 2020.
This explained why Australia’s exports to the US were forecast to remain flat or drop slightly from 2017 levels.
Nearly 30 years ago Mr Klett established Anipro, a liquid supplement company which now sells product in 36 US states.
It is also responsible for the largest feed company in Australia, Performance Feeds.
He is also involved in his family’s 20,000 head feedlot and research centre as well as a 400 cow ranch in New Mexico.
Mr Klett said there had been a “genetic revolution” in the past 20 years which had ensured major beef productivity gains.
The US is forecast to produce 28.2 billion pounds of beef a year in 2020 – six billion more pounds a year with seven million less cows when compared to 1982.
He said heavier carcases were adding to tonnages, along with improved cut out rates (yields).
“When I was a young man out of high school in the early 1980s we marketed fat cattle no matter what at 1050 pounds (476kg),” he said.
“Today we have animals go into the feedyard at almost 1050 pounds and we don’t market animals until they are 1400 to 1450 pounds .”
Mr Klett said the number of cow-calf operators had dropped by 25 per cent in the past 30 years.
USDA figures show this trend was likely to continue, dropping from 678,000 to 626,000 by 2022.
Retirement was a factor with the average age of a US beef producer 62 years, but urban sprawl was taking an more than 202,000 hectares a year of productive farmland.
Mr Klett was not overly concerned about a US-China trade war with the US’s 326 million people consuming most of the beef produced.
He said the volumes sold direct to China each year were only small.
“The amount we send to China could just about fit in this room,” he said.
- Story provided courtesy of Stock Journal