Kansas ranchers face another profitable year in 2015

Kansas cattle ranchers will see another extraordinarily profitable year in 2015 as cattle prices continue to climb, said Randy Blach, president of CattleFax, a cattle industry consultancy.

He spoke Thursday morning at the annual meeting of the Kansas Livestock Association at the Hyatt Regency Wichita.

“We’re having a nice run of profitability after four difficult, difficult years, so a pretty happy crowd,” Blach said in an interview after the presentation.

Suffering from four years of high corn prices and drought-shriveled pastures, the nation’s cattle herd hit its lowest level in decades a couple of years ago. That drove up prices to unprecedented levels and put significant financial pressure on beef packers and consumers.

But in 2014, as the drought ended and crop and forage prices began to fall, ranchers saw their circumstances improve even further. High demand and relatively tight supplies of beef came with shortages in the pork and chicken supply.

So after a tough spring, the critical moment came in June and July when the rain started falling, and falling, and falling, Blach said. Farmers decided that the drought was over, that they could find enough grass for their cattle, and they started holding back cows and calves.

Ranchers started what Blach calls an “accelerated expansion” in rebuilding their herds, holding back cows and heifers from slaughter.

In 2015, there will be a continuation of some of those trends and a reversal of others.

The herd is starting to grow again. The number of animals sent to slaughter will start to rise in the second half of the year.

All segments of the industry will be profitable next year, Blach said.

The cow-calf operators – those who produce and sell the calves – will see the biggest and most sustained profitability because demand will remain strong, even as some costs remain low, he said. He expects those operations to remain profitable for the balance of the decade.

He expects rain across the U.S. to be plentiful in 2015, which will boost pasture and grain growth, keeping those costs down.

“Those of you in the grain business, we’re going to be in and around break-even for the next several years,” he said. “It’s a typical commodity market. We had a big run, made a lot of money. Now, those of you who grow wheat, corn and beans, you need to put your risk management hat on.”

Those down the supply chain – the stockers, the feedlots, the packing plants – will also remain profitable, but will begin to feel the squeeze as the market tightens up.

Blach said he expects the competing industries, pork and poultry, to snap back and grow by 4 or 5 percent, reducing demand for beef.

But because beef demand will still outstrip supply in 2015, he expects prices in the grocery story to rise, but only slightly.

Blach did issue a warning to the assembled Kansas Livestock Association members after a very comfortable 2014:

“Most of you who have been farming for a while have never seen anything like this,” he said. “It’s easy to get used to, but you better not get too used to it.”

This story was originally published December 4, 2014 at 12:16 PM with the headline "Kansas ranchers face another profitable year in 2015."