The early morning CattleFax outlook seminar and weather report is always a popular session at the National Cattlemen’s Beef Association convention. The overall theme of CattleFax’s outlook for the U.S. and global protein and grain outlook was generally positive. Beef prices are at record high levels and demand is at a 30-year high. However, drought has caused reason for concern with cattle liquidation, as well as tight, therefore higher, grain prices.
Randy Blach, CattleFax CEO, said peak cattle cyclical supplies were expected in 2020, but COVID-19 pushed that back to 2021. The harvesting issue that was so prevalent during the peak of the pandemic—leading to a backup of approximately 1 million head—is largely caught up. Prior to the pandemic, the industry already required an extra 5-7 percent more than capacity allowed. Labor issues will continue to be an issue and therefore further investments in tech and automation will be key.
The cattle market is still dealing with a large amount of market-ready fed cattle, which will begin to disappear as three years of herd contraction reduces feedlot placements. At this point, the price of calves, feeder cattle and fed cattle will increase, and CattleFax expects prices to increase several hundred dollars per head over the next few years.
Mike Murphy, vice president of research and risk management, discussed unemployment rates and increasing inflation rates. Inflationary prices at retail will stay, he said, and will finally trickle down to producers in the next several years.
Kevin Good, vice president of industry relations, analyzed cattle inventory and beef production. We will be moving into tighter supplies while beef demand continues to grow. Even throughout the pandemic, consumers were willing to pay more per pound compared to other proteins. The beef market has been able to gain back 8 percent of lost market share from the 1980s, with 2 percent alone during last year.
Commercial cow slaughter is up close to 10 percent higher this year to date. There are still very high slaughter levels, due to reduced cow herd size, but next year will likely see 100,000 fewer head slaughtered. A high percentage of heifers are headed to feedyards due to unavailable feed resources, and mild liquidation will likely continue again next year, particularly in the West.
Trade has been very beneficial this year, with exports up 15 percent and imports down 8 percent. Good said 1.5 pounds per capita were taken off the domestic market and shipped overseas, and is optimistic exports will increase next year.
Dr. Art Douglas, professor emeritus at Creighton University Department of Atmospheric Sciences, forecast there will be a return of La Niсa in the fall, which would lead to intensifying drought for the West and Plains into early 2022. The return of El Niсo is more uncertain. There is a one-third possibility based on 12 years of data that La Niсa could continue for another year, while the remaining years predict El Niсo conditions will return within a year.
Blach said overall, supply has peaked, demand is strong, prices are headed higher and leverage will increase for producers. He also cautioned against saying, “‘We want to invite the government in to fix the problem.’ These markets will fix the problem and they will get it done.” — Anna Miller, WLJ managing editor
