Sam Gazdziak spoke with Randy Blach, CEO of CattleFax, about the outlook in 2015 for the cattle herd and how it affects packers and processors this year.
Sam Gazdziak:We're speaking with Randy Blach, CEO of CattleFax, and with Randy wound up giving a presentation at the meat conference this week. But just wanted to ask you, what is the outlook in 2015 for the cattle herd and how do you see that effecting the packers and processors this year?
Randy Blach:Well, we've come through a situation as you know, Sam, the last several years we've gone through declining numbers. We had record high grain prices. We had a major drought we've been struggling with for the last 15 years. Now that we've seen grain prices soften, our grazing conditions have improved substantially. Actually they were the best this last year they've been in 25 years. So we're in the process of expanding the nation's cattle herd. The cattle herd was up about 700,000 head this last year. It will continue to grow over the next several years and as a result of that we'll see increasing beef supplies. So for end users of beef product, the packing segment, retail food service, the smallest supplies were the fourth quarter of 2014 and the first quarter of 2015. We'll see increasing supplies as we move on into the summer season and then we'll start seeing year over year increases in head slaughter as we move into the second half of 2015 and that will continue for the next two to three years.
Gazdziak:So with the changes in the beef herd then, how is that going to affect consumers wallets and their ability to be purchasing beef at the grocery store, restaurant?
Blach:Well as you know the last several years all protein prices have pushed higher. We've had a situation when we have a high grain environment it's hard for our protein segments to expand. As grain prices have softened we've now got into a situation we're seeing increasing total meat supplies. In 2014 we coined that as a perfect storm, didn't we? Because none of the protein markets could respond for various reasons. 2015 we'll see three billion more pounds of protein on the US market or three billion more pounds of production, I should say, between beef, pork, and poultry in 2015. So, prices will stabilize. We've seen the peak in prices. We'll see prices start to ease up. Margins will actually improve for retail and food service operators as we move on into the second half of the year. So it's a record large production in 2015. Now we know our exports will continue to increase over time, so the blue would represent the portion that is being exported. So exports are important, but with the port situation, the way it has been, where we have slowed the exports of product around off the west coast. More of that product is now going to have to be absorbed in the US marketplace. So, those are the uncertainties that markets don't like.