“Beef demand to me is a good story,” said Kevin Good during the outlook session of the National Cattlemen's Beef Association’s Cattle Industry Convention Winter Reboot held virtually on Feb. 24. Good, a senior analyst at CattleFax, told viewers that beef production is set to be record large again this year – half a billion more pounds, to be exact. However, beef demand coupled with export and population growth is expected to offset that increase.
“In the last 20 years, we’ve gained market share,” Good said. “I think it’s very important to look at this past year in particular with the pandemic – people were staying home, cooking at home and what was the protein of choice? It was beef. The dollars spent showed that. So, that is a good message to our industry as we think about the product we are producing.”
Last year, grade increased three ticks when looking at Prime and Choice together. Cattle were fed longer due to plant closures, and the long-term march toward genetic improvement also attributed to this increase. Good suggested the U.S. cattle herd will continue to grade more Choice than Prime as a percentage over time, driving demand and dollars back to the right type of cattle.
Retail versus foodservice could be another positive demand factor. Good said, “Retail has moved a lot of product over the last 12 months, and they are not going to give up market share to foodservice very easily. They are going to fight for that market share. And, at the same time, you have exports coming in, so you’ve got a three-pronged demand factor that should be supportive to our protein as we go through this year.”
Good expects trade to remain a key driver in beef demand, with exports up 5%, primarily into Asian economies, and imports down 5%, with less product coming in from Australia. China exported 120 million pounds last year, but in November and December, they averaged 25 million pounds a month. Good noted that if that trend were to continue over a 12-month period, China would be a 300-million-pound market going forward, with the possibility to grow even larger over the next couple of years.
“Balanced trade is going to eat up more than half of our increased production,” Good said. “So, it is going to be very important, not only from a tonnage standpoint, but also as an aggressive buyer in the beef complex. We are already starting to see year-to-date some of the chuck items have been on fire, primarily because of that better export market.”
Price outlook
Good expects the U.S. cowherd will continue to liquidate over the next 12 months, with drought being the primary driver, especially in the western half of the U.S., as well as higher feed costs. Supplies are expected to get tighter over the next three to five years, with cow slaughter up 5% and dairy cow slaughter up 4%.
“Another point I would like to make is look at where the cycle was in 2013 and 2014. We don’t have to get that low,” he said. “We don’t have to liquidate nearly as many cows as we did the last cycle, primarily because we feel like we have much better beef demand and dollars in the system; we just need more of those dollars trickled down into the cow-calf producer’s hands.”
Good forecasts fed cattle to average $119 per hundredweight (cwt), with 800-pound feeder steers averaging $145 per cwt and 550-pound steers averaging $170 per cwt. Lows will still occur in the fall run but will be less pronounced than the long-term average. Utility cows come in at $64 for averages, trending slightly higher since the low in 2018, and bred-cow costs are expected to average $1,600.
“We are going to be pretty optimistic from a price outlook,” Good said. “Higher input costs, Mother Nature working against us, but at the same time, we are going to get some relief. We expect prices to be higher going forward.”
