Get ready, beef producers, for a good ride. That’s the message from beef industry market experts at CattleFax. They told it to the beef producers gathered in Nashville for the 2021 Cattle Industry Convention.
CattleFax CEO Randy Blach, ticked off several factors that are coming together to fuel the good times coming in cattle prices, which could last for several years.
- Shrinking inventory. Not only are cattle numbers falling in general, but particularly inventory of market-ready cattle in feedlots is about to back off. During the early months of the pandemic in 2020, those cattle got backed up in feedlots as plants slowed or shuttered. “We still haven’t fully caught up with that inventory backlog,” said Blach. “Right now, we’re cleaning up the front-end supply. When that happens, this cattle market could be explosive. We don’t know when exactly, but it could be in two to six months.”
- Record demand. Beef demand, a metric of supply and prices, has been on a tear. Beef prices in the supermarket are at record levels, near $7 a pound. That, coupled with record beef supplies, is a good combination and means overall beef demand is at its highest point in over 30 years. Even the pandemic seems to have helped beef demand, as consumers stayed home to eat and pampered themselves with beef on the grill.
- Record exports. According to Blach, exports add nearly $400 per head to the value of beef animals, and he thinks that number will go to $500 within a few years. China is the driver, as exports there have now surpassed what we send to Canada or Mexico.
- Harvest capacity. As cattle inventory backs off and packing plant capacity increases, Blach predicts that cattle producers will gain leverage over packers in the bidding process for fed cattle. Right now, of the $750-per-head margins in cattle in the farm:retail spread, packers get about $400 and the rest is spread out among producers and retailers. “By 2023, that will get back into balance and leverage will come back to cattle feeders,” Blach said.
- The economy. It’s coming back, along with inflationary pressures. Customer traffic has remained strong at restaurant and retail shops. Consumers seem willing to pay more for beef.
Put all that together, and CattleFax thinks fed cattle prices will show a nice bump in 2022 to $135 per hundred, up from $121 this year. Peaks will be as high as $145.
As for feeder cattle, the 550 to 600 pounders that cow/calf producers typically sell could average over $200 per hundred next year, with peaks to $230. That’s up from about $170 average in 2021. “We’re looking at a very solid fundamental picture for the beef industry,” reports Blach.
EDITOR’S TAKE:
We don’t want to sound like a broken record, but this is a great wake-up call regarding who your best customers might be in the coming year – think beyond the current situation! What will your inventory look like in six to nine or twelve months from now and who will you sell that inventory to? Predictions in this article would suggest that you might want to put cattle producers on your prospect list. Certainly, there are some immediate challenges for cattle producers (weather, pasture and hay supplies, etc.), but as producers overcome the short-term challenges and prices return to "normal", incomes should improve rather solidly according to the experts. Plan ahead, think outside the box and see how you can connect with ranchers to build those relationships that will serve you well into the future!
