Food Business News - February 9, 2016 - (Page 24)

Market Insight Beef is bouncing back Cattle numbers rally 3%; beef prices easing as industry recovers from historic herd decline he U.S. cattle inventory on Jan. 1 was up 2,845,000 head, or 3.2%, from a year ago, the largest year-over-year increase since 1981 and the largest percentage increase since 1975, when the herd peaked at an all-time high of 132 million head, U.S. Department of Agriculture data show. In its annual Cattle report issued Jan 29, the U.S.D.A. pegged total inventory of cattle and calves at 91,988,000 head, the second consecutive year of increase after a recent bottom of 88.5 million head in 2014, which was the lowest inventory since 1952. The Jan. 1, 2015, inventory was revised down slightly to 89.1 million head, up less than 1% from 2014. The increase suggests the U.S. cattle herd is solidly in the rebuilding phase of its multiyear cycle, which typically averages about 10 years and may be traced back to the mid-1800s, although it got "out of whack" for T RON STERK 24 FOODBUSINESS NEWS ® a time after 2006 as corn prices moved to higher levels due to increased demand from ethanol manufacturers and feed supplies shrank (and prices rose) due to adverse weather. The cycle is the result of cattle prices and biology. Low cattle prices typically trigger a reduction in herds, which may occur quickly as producers may haul cattle to market in a day. High prices typically encourage producers to increase herds, which takes longer because of biology (number of months for a cow to have a calf, for a heifer to reach breeding age, for it to have a calf and for the calf to reach slaughter weight, etc.). Cattle and beef prices typically peak early in the rebuilding phase as heifers are held off the market for breeding, which further reduces slaughter cattle numbers and beef supplies for a time. Cattle and beef prices reached record highs the past couple of years and likely peaked in 2015. The U.S.D.A. said the number of beef replacement heifers (those kept for breeding and not sent to slaughter) was up 3% from Jan. 1, 2015. The number of steers weighing 500 lbs and over (coming to slaughter in the next 7 months or less) was up 4% from last year, indicating an increase in beef supplies during 2016. The number of calves under 500 lbs also was up 4%, suggesting rising beef supplies further out. Aiding in the rebuilding phase Total cattle and calf inventory in head 2016 91,988,000 2015 89,143,000 2014 88,526,000 2013 90,095,200 2012 91,160,200 2011 92,887,400 2010 94,081,200 2009 94,721,000 2008 96,034,500 2007 2006 2005 2004 96,573,000 96,341,500 95,018,000 94,403,000 Source: U.S. Department of Agriculture of the cattle cycle has been declining feed prices, with corn futures only modestly above multi-year lows. Prices for corn paid to farmers averaged $3.70 a bu in 2014-15, down 17% from a year earlier, and are forecast to average around $3.60 a bu in 2015-16 (September-August), the U.S.D.A. said in its latest World Agricultural Supply and Demand Estimates report. Further indication of active herd rebuilding came from the U.S.D.A.'s January Cattle on Feed report, which showed the total number of cattle in feedlots on Jan. 1 at 10.6 million head, down slightly from Jan. 1, 2015. The number of steers on feed was up 3% while the number of heifers was down 7% and the lowest per cent of the total since the U.S.D.A. began the data series in 1996. Those heifers most likely are going into cattle herds for breeding. Cow slaughter (as opposed to slaughter cattle from feedlots) also points to strong herd rebuilding. "Beef cow slaughter has accounted for less than 50% of total annual commercial cow slaughter in only two years - 2014 and 2015 - since the early 1990s," the U.S.D.A. said in its January Livestock, Dairy and Poultry Outlook. "Such a low level of beef cow slaughter could indicate potentially significant herd rebuilding. Estimated total annual commercial cow slaughter for 2015 is expected to be the lowest since 2005 - the last attempt at cow herd expansion - and about 13% below the average for the last 29 years." As the cattle herd grows and slaughter numbers increase, larger beef supplies and lower beef prices should follow. The U.S.D.A. forecast U.S. beef production at 24,605 million lbs in 2016, up 3.8% from 2015 and the first increase since 2010. Annual average slaughter cattle and feeder cattle prices are forecast lower for the second consecutive year after peaking in 2014. Currently, wholesale prices based on the U.S.D.A.'s cutout value for a 600- to 900-lb choice beef carcass are down about 17% from their peak in May 2015. Lower cattle prices should not deter herd rebuilding, because feed prices are relatively low. And lower beef prices may encourage domestic consumption, which had stagnated when retail beef prices were record high the past couple of years. FBN February 9, 2016

Table of Contents for the Digital Edition of Food Business News - February 9, 2016

Food Business News - February 9, 2016
Mondelez expects snack sales to slow
Starbucks ‘firing on all cylinders’ in C.P.G.
Beverage Business News - Boosting the nutrition profile of beverages
Table of Contents
Web Contents
Editorial - Trust and the rising bar for ‘achieving’ food safety
Survey finds natural labels may mislead consumers
‘The U.S. consumer has changed’
Take the lead in transparency
ChemChina to acquire Syngenta for $43 billion
A new venture for PepsiCo
Chipotle focusing on recovery, food safety
Coca-Cola takes stake in Nigerian business
SuperValu picks new president, c.e.o.
Madagascar 2 - Vanilla prices soar again
Nestle in talks to acquire Israel’s largest food company
Global challenges weigh on Hershey’s earnings
Court sides with Dannon, General Mills in yogurt case
Market Insight - Beef is bouncing back
Ingredient Trends - Plant protein applications evolving
Ingredient Innovations - Three considerations when choosing emulsifiers
Emulsion innovation extends beverage stability
New Food Products
Ingredient Market Trends - Ethanol fuels fireworks in the Iowa Republican caucus
Ingredient Markets
Supplier Innovations and News
Ad Index

Food Business News - February 9, 2016