It appears that beef packers are recovering from the omicron COVID breakout a couple weeks ago. Slaughter levels are back up to 120,000 head a day and should start pulling cattle through the system. Futures markets have been positive the last week, pulling prices over the $140 level.
I enjoy watching the Lanesboro, MN, fed cattle auction every Wednesday; they sell everything from fed dairy steers to the finest farmer feeder fed steers. The market varies widely at this event. Last week, one group of steers weighing 1,550 pounds brought $149.75. Buyers seem to like the big ones that will hang at 1,050 lbs., which is their advertised weight limit.
The bullish Cattle Inventory report has really propelled the cattle markets and shows a very positive outlook for the next few years. The downside is input costs. Corn and other feed grains are close to all-time highs. Corn was priced around $6.50 last week and remains on an upward trajectory. You’ve heard it before: Expensive feed makes for expensive cattle, and prices at the meat case continue to move higher, and consumers keep on buying it, most of it in ground beef form.
It appears the futures markets have fed cattle priced just about right for the next 12 months. April is the nearby high at $147, and then it drifts down to $142 in the summer months, then moves into the $150 zone going into the fourth quarter. This is a predictable seasonal pricing pattern. The price levels could be higher or lower depending on whether beef demand continues at its current pace.
Retail beef prices have started to moderate but remain at high levels. The fourth quarter of 2021, all fresh retail beef was selling at $7.47/lb. and averaged $6.94 for 2021. Last year, the U.S. beef availability was around 27.9 billion lbs., which would put a value on the beef industry of around $185 billion dollars.
When I look at our industry from that perspective and all the ways the beef chain adds value to beef products, it is a remarkably huge industry. Remember, consumers endorse a product with their dollars, and it is clear they like the beef this industry is producing today—it was different 30 years ago.
Beef has come a long way over the past 30 years. Almost 30 years ago to date, Monfort packers embarked on the hot fat trimming idea; we were in the war on fat, and Monfort thought it would be better to trim the bark off at the plant.
The industry came together and through the Beef Checkoff came up with the Industry Long Range Plan. The plan would be updated every five years. The plan started value-based marketing, which wasn’t widely accepted, most fed cattle traded for an average price and feeders would send an average pen to the packer.
Average certainly wasn’t enough, and grid marketing was developed, which increased product quality over time. Today, 85 percent of our product is Choice or better, which has created the consumer demand we enjoy. I would have to say the Industry Long Range Plan may have been the best investment Beef Checkoff has made.
Feeder cattle markets look solid for some time, although drought continues to be spotty. Next fall’s feeder cattle futures are at a big premium starting in August, at $186.05, and November, at $188.75. This should bode well for holding calves over for next summer’s grazing programs, as long as there is grass next summer. From where I sit, there is money to be made on post-weaning gains—if you’re set up for it. The 850 lb. yearlings are going to be a valuable item this next fall, just saying.
Grass and moisture appear to be the elusive elements going forward. Hay prices north of $250 a ton will be a challenge. If Mother Nature would cooperate, the beef cattle business would be a growth industry.
The drought map shows abnormally dry weather in the center of the country, with the West in varying degrees of severe drought. This drought is moving into the Corn Belt as far east as Wisconsin and Iowa. This drought is expanding, which could be problematic for feed grain production. The West Coast received good moisture in December and grew some feed. However, they are in desperate need of moisture. By now, you know the drill: Pray for spring rain. — PETE CROW
