CattleFax: Opportunities aplenty in a rebounding beef market

Prior to COVID-19 disruptions, the market was already in a position that it had to harvest 5%-7% more than the capacity available. It will be a long haul to get production back to where it needs to be, especially since all facets of the U.S. economy are struggling with a labor shortage following the shutdowns/downscaling businesses were forced to enact during the initial stages of the pandemic. “We need to get people back to work,” Blach said. “This period where we’re competing against our own government to get people back to work is ridiculous.” With domestic and global beef demand going strong, supplies are expected to tighten, creating better margins for producers and more shackle space to boost production.

Carrie Veselka

Editor / Progressive Cattle

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Blach praised producers for the overall increased consistency of quality of beef that has kept domestic demand strong, even through the pandemic. Referring back to the cattle industry crash in the 80s, Blach said, “I can remember standing on this stage 30 years ago and talking about the situation with the beef industry, and it wasn’t a very good story, was it? And today, beef demand is at the highest level it’s been in 33 years.”

Blach shared some key takeaways from the outlook session:

Supply has peaked.
Domestic demand is strong.
Exports are record large.
Leverage will improve for producers.
Prices are headed higher.
Cow-calf profitability will improve significantly.

Inflationary pressures are real and will continue to escalate. The beef market is susceptible to inflation and will fluctuate accordingly, but the cattle market should stay relatively uninvolved. “This is not over with yet. We will still have a lot more inflation that we’re going to have to deal with over the course of the next couple of years,” he said. “Don’t take your eye off that target.” Blach also said that as money flows back into the markets, the effect on the beef market could be explosive, so be prepared. “Whether it’s two months from now or six months from now – it all depends on the way we can work through this front-end supply.”

This year, 18% of the product we have produced has been exported to consumers around the world. The U.S. is the largest meat producer, aside from China, and the top producer of both beef and broilers. “We have a major stake in these global markets, and I think, going forward, that is one of the things that has changed over the course of the last 20, 30, 40 years,” Blach said. He credited the U.S. Meat Export Federation and other groups for the work they’ve done to expand the U.S. presence in the global protein market.

Blach ended his comments by encouraging consumers to stay focused on the big picture and pay attention to the discussions surrounding sustainability and other industry issues. “We need to make sure we understand that some of these issues are very important for our consumers,” he said. “[These discussions] are further opportunities for our industry to meet the changing demands of our consumers.”