Beef market will continue crawl back to normal in 2016: Nalivka

WASHINGTON, D.C. — The pendulum of the beef supply chain has been swinging back from the drought-driven extremes of the last couple of years toward the middle, and will continue in that direction into 2016, expects John Nalivka, principal with Sterling Solutions LLC of Vale, Ore.

He laid out his expectations for the beef market in 2016 and into 2017 in a presentation to the North American Meat Institute’s Outlook Conference here last week.

“We should see 4 percent more (commercial cattle slaughter) next year, against this year’s 5 percent drop,” Nalivka said. “With those cattle will be more weight; I’ve got weights up about a percent in 2016.

“We should start seeing that increase as early as the first quarter.”

Average carcass weights have taken a sharp jump in 2015, to about 885 pounds on average.

Meanwhile, fed slaughter capacity utilization in the beef packer and processing sector also will improve, to 87 percent in 2016 from an estimated 83 percent this year, Nalivka said. Still, compared with a 92 percent average utilization rate between 2000 and 2013, the industry has a ways to go to optimize its returns, he noted.

TPP

The outcome of the negotiations for the Trans Pacific Partnership is a positive for beef, Nalivka said. “We don’t know how that's all going to go, but the bottom line is that it should. It'll be an interesting process and we'll see how it goes.”

Long before the provisions of the TPP will go into effect, Nalivka believes that exports in 2016 will increase some from 2015 levels, “even with the strong (U.S.) dollar, because the price is coming down,” he said.

Year-to-date in 2015, he said, beef imports are up 32 percent, a large share of which increased trade is from Australia.