Tumbling cattle prices have left the mood of the state’s ranchers a lot more somber this year.
The Kansas Livestock Association held its annual meeting at the Hyatt Regency Wichita this week and, on Friday, heard from Randy Blach, president of market analyst CattleFax.
Blach’s message is that he knows 2015 has been a rough ride for ranchers as prices have plunged from their record highs a year ago.
The reasons have been long in coming. Ranchers and feeders enjoyed a terrific year in 2013 and 2014 as beef and cattle prices skyrocketed. Herds had shrunk because of the drought, and prices hit record highs.
High prices and the return of the rains caused ranchers to hold back large numbers of heifers to rebuild herds.
$125 Slaughter price per hundred pounds for cattle, down from $174 last year
Well, now the herds are largely rebuilt. And more steers are being sent to slaughter. The effect has been dramatic in the second half of the year, Blach said, citing the slaughter price for cattle.
“Last year at this time it was $174 a hundred (pounds),” he said. “Now, it’s $125. That’s a $50-a-hundred loss in a very short period of time.”
In addition, the export market for beef has dropped significantly as the global economy, particularly in China, has slowed, and the dollar has risen 15 to 20 percent against foreign currencies.
Beef prices that consumers see in grocery stores will fall by mid-2016
This year has already punished some of the middlemen in the chain. Kansas feedlots have seen steep losses in the second half.
For the consumer, high prices will start to fall in grocery stores by mid-2016, Blach said. Shoppers will start seeing more quantity, variety and price specials.
“It will start being pretty visible,” he said.
And prices will remain down through the end of the decade, he said, rebuilding demand for beef.
As for cattle producers and the cattle markets, they will feel a lot of pain, trim back on production, and ultimately reduce capacity and make the adjustment needed to re-establish a reasonable margin, he said.