Cattle prices in 2014 reached record levels, which created optimism and incentive for the industry to expand. Informa Economics Senior Vice President Mike Sands said with herd expansion underway, these price levels have some downside risk. The cattle market has seen more volatility since late 2014 into the first quarter of 2015. Sands said that volatility is a function of how tight supplies are.
“As supplies have tightened up, the upside risk in the market certainly has been rather significant,” Sands said. “We have posting record highs off and on since last summer - all the way across the spectrum of the cattle market. But as supplies now begin to look like at least expansion is underway, maybe we don’t see a big increase in beef production this year and potentially not even a big increase next year, but the point is, there are bigger supplies coming at some point. That will give us some downside risk as we move forward.”
In January the U.S. Department of Agriculture released the annual cattle inventory report and showed the nation’s producers have begun to hold back heifers and increase the size U.S. cow herd. Sands said there is no question the amount of heifer retention accelerated rather aggressively in 2014 and USDA also revised some historic numbers higher, so the industry is starting out at a higher base.
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