DTN’s Top Ag Stories: Record-Breaking Year for Livestock Records

    If you’ve ever questioned the proverbial wisdom “A rising tide lifts all boats,” the amazing livestock market of 2014 may serve as definitive evidence in the elimination of all doubt.

    Never before have record keepers documented such a bullish floodplain, surging waters of supply and demand that caused cattle, hog, and chicken prices to repeatedly crest at history-making levels.

    Of course, there’s nothing terribly unusual about instances of roiling price behavior in the choppy sea of commodities, violent whirlpools and eddies that momentarily swamp selective banks of market probabilities. Yet what made the 2014 deluge so extraordinary was how it stormed so hard for so long, virtually affecting the entire coastline of meat production and pricing.

    In short, this year represented the first time in recent history when all major species of livestock simultaneously smashed previous all-time highs by breathtaking margins.

    Many would argue the raging cattle market symbolized the headwind of the tempest, the initial and most forceful blast that sent a wide range of related values spinning in the same direction.

    When the record book was officially closed on 2013, the highest average price ever paid for a 5-area market steer totaled $131.78 (in December of that year). As lofty as that price level seemed at the time (e.g., 4% and 6% greater than the historical tops of 2012 and 2011, respectively), the bar (i.e., 5-area monthly average) was destined to be substantially raised no fewer than seven times in the year ahead.

    The new all-time steer record was set in November at $169.50. Based on preliminary price data for December, the 2014 annual average price for 5-area slaughter steers averaged right at $154.50, more than $28 per cwt greater than the 2013 average (i.e., up 22%). This stands as the fifth consecutive year with record fed cattle prices.

    While such impressive stats make a strong case for cattle market stardom, the remarkable performance of the hog trade in 2014 was not exactly community theater fare. Indeed, there were explosive moments in the first half of the summer when the runaway hog market made cattle action look comparatively lackluster.

    The record-setting hog market actually launched 2014 with a round of unassuming sluggishness. January’s average price on Iowa dressed barrows and gilts totaled just $79, 6% below the previous year. But such sleepy spending did last long. For the next 11 months, the hog market resolutely held 9% to 48% premiums over 2013.

    Coming into the year, the all-time record for slaughter hogs (i.e., Iowa dressed base) was $99.41 set in August 2011. But by the time December’s sun was setting, the high water mark had been jacked to $127.85 thanks to absolutely frantic packer spending that had surfaced in July. The 2014 average was approximately $103.15, 19% greater than 2013 annual, and surpassing the old yearly record set in 2011 at $87.52.

    Although this year’s chicken market paled in comparison to rocketing red meat, it also turned in a very strong display of historical price appreciation. While national broiler prices struggled below year-ago levels through the first quarter of 2014, something caught fire in the early spring. The heat proved enough to suspend monthly averages 3% to 17% above 2013 through the balance of the year.

    Broiler prices established a new all-time high of $117.59 in May, up nearly $7 from the previous record set in the late spring of 2013. The 2014 annual averaged was roughly $104.92, 5% greater than the 2013 average.

    Without minimizing several unique supply and demand positives in birdland, sometimes it pays just to live in the right neighborhood (and look like the best bargain on the block). Colonel Sanders himself would no doubt express gratitude for just being on board when the tide is rising.

    A majority of market judges would probably credit most of the phenomenal success in red meat markets to reduced supplies of commercial beef and pork. Such a judgment is easy to understand and not without considerable merit.

    By the time the final scale ticket is processed, 2014 beef tonnage will total close to 23.8 billion pounds, 6% below last year’s production. The attending reductions in fed (off 5%) and non-fed (off 14%) were functions of smaller calf crops for more than a decade and significant drought relief encouraging the retention of cows and bred heifers. The break in yearly tonnage would have been substantially greater had it not been for the persistence of record carcass weights (i.e., encouraged by the price action described above).

    On the other hand, commercial pork production for the year was reduced to 22.66 billion pounds, generally 2% below 2013. Needless to say, 2014 will long be remembered for the scourge of PED, the dreaded disease that devastated so many pig litters last fall. Indeed, actual hog slaughter this year dropped by as much as 5% thanks to this incredible death loss. As in the case of cattle, only heavier carcass weights worked to prevent pork supplies from falling even more.

    Yet despite the undeniable bullishness of short meat supplies in 2014, cattle and hog prices hardly rallied 22% and 19%, respectively, without a major improvement in consumer demand.

    Many worrywarts will remember stewing throughout much of the year about sticker-shock and inevitable consumer resistance — both domestic and foreign — in the face of ridiculously expensive steaks, chops, and hamburger.

    Such nervousness may have seemed justified given past patterns of end-user spending, but as the amazing bullish parade of 2014 winds down, any misgivings about the adequate strength of meat demand turned out to be a general waste of time.




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