Hopes for a Back-to-Back El Nino to Help Support Grazing Conditions for Herd Rebuilding

Listen to Ron Hays talk with Randy Blach about the state of the cattle industry.

Senior Farm and Ranch Broadcaster, Ron Hays, is featuring comments from the President and CEO of CattleFax, Randy Blach, at the recent Texas Cattle Feeders Association Convention in Grapevine, Texas.

As a keynote speaker at the TCFA Convention, Blach talked about where the cattle business is at now and what it will take to start rebuilding the herd.

While the herd shrinkage has not stopped over the past year, Blach said there are some areas in better shape grazing-wise and water-wise, but parts of the Southern Plains are still suffering.

“We still have got another two to three years of tightening supplies before we can start to rebuild these herds,” Blach said.

Fewer pounds available domestically and internationally will mean competitors will gain market share at our expense in some of our key foreign markets.

“With production down five percent this year, it is a significant supply decline, so U.S. beef prices are very high when we look at the global market,” Blach said. “Other suppliers like Brazil, Australia, and New Zealand are gaining market share on the U.S. beef export markets in places like Japan, China, and South Korea.”

Another topic Blach talked about at the convention was money flow in cattle markets.

“Typically, when markets are trending higher, we have more money flowing into them and more outside speculative money that is coming in investment money,” Blach said. “That is always important for our markets to where we have somebody we can lay the risk off to.”

There has been some uncertainty in the past few weeks regarding whether a budget deal will pass through Congress, Blach said, and with no leadership in the House, more liquidation of money flow has been seen.

“Whenever you see money flow coming out of markets, typically, a market is trending down,” Blach said. “A futures market is trending down. It lessens the opportunity for producers to be able to lay off that risk when we go through these types of times.”

Regarding drought, Blach said conditions have improved nationally, but there are some key areas in beef cattle country that are still not ideal.

“It is a strong El Nino, but not everybody is participating in it,” Blach said. “I think the thing we have to watch for is a lot of El Nino’s don’t last more than a year, so we are watching this one pretty closely to see whether we are going to have back-to-back years of El Nino to where we can see more of the U.S. get into a more favorable grazing and water position.”

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