Optimism tempered with caution are the words to remember in the livestock outlook for 2010, according to John Anderson, an Extension livestock economist with Mississippi State University.
“The livestock market in 2009 was pretty tough, but there are good reasons to be optimistic in where these markets are headed as we move through 2010,” Anderson said at the American Farm Bureau Federation’s 91st annual meeting.
In 2009, weak profit margins for producers of beef, pork and poultry led to reductions in supply as 2010 begins, which means a more favorable supply situation. However, questions still remain on the demand side of the equation.
“We really need help on the demand side, and there are signs of improvement,” Anderson said.”The general economy remains the key to future developments in the livestock market.”
Anderson said demand recovery has already started to show up, but market participants must be convinced the demand recovery is real. “Market participants must be convinced demand-side improvements are here to stay,” Anderson said.
In addition to improving prices, livestock producers should see improvements in profit margins in 2010. “”Feed grain prices remain historically high but have stabilized in recent months. Increasing grain and oilseed stocks have reduced some of the pressure on grain prices that has been the dominant feature of those markets since late 2006,” Anderson said.
“There are good reasons for cautious optimism regarding feed prices, but volatility may continue to be an issue,” Anderson cautioned.
“This year is shaping up to be one of the best years for livestock and poultry producers in several years, but this will depend on healthy demand supported by a recovering economy,” Anderson said.