There is never a shortage of world news that affects the cattle industry, and 2022 was no exception. Here are the biggest stories from the past year.
BSE in Brazil causes import angst
Two cases of bovine spongiform encephalopathy (BSE) were reported in June 2021, sparking concern among U.S. producers and industry organizations such as National Cattlemen's Beef Association (NCBA). However, imports of Brazilian beef to the U.S. have continued at a near-record pace throughout 2022. In the first quarter of 2022 alone, the USDA reported that beef imports from Brazil reached nearly 50,000 metric tons.
Brazil has historically been slow to report similar cases to its export partners, a major factor in NCBA and other organizations’ urging the USDA to suspend – at least temporarily – importation of Brazilian beef. So far, however, that has not happened, though Brazil beef imports do face a steep tariff of 26.4% for any product surpassing the threshold of 65,000 total metric tons (MT) from countries with no formal trade agreement with the U.S.
Russia-Ukraine conflict disrupts grain exports and energy prices
Russia’s invasion of Ukraine in February threw global grain and energy markets into upheaval. Exports from the Black Sea shut down immediately, causing grain and fuel prices to climb rapidly around the world, and setting off a series of sanctions against Russia. Due to the continued fighting between Ukrainian and Russian forces, Ukrainian farmers have faced challenges planting and harvesting this year. Ukraine’s agriculture ministry says the country is likely to register a significant drop in output this year, falling to about 50 million MT (roughly 55 million U.S. tons) from a record 86 million MT (roughly 95 million U.S. tons) in 2021 because of the invasion. Any deals on resuming exports from the Black Sea are currently on hold, as of press time.
Price transparency debate
The aftermath of market disparity seen after the Tyson fire and COVID-19 scare led to cattle issues going to Congress. While cattle associations in NCBA committees debated whether they were warranted, proposals still went before the Senate ag committee requiring higher volumes of cash trade at the end stages of production. Opposing parties testified that mandating cash trade levels would damage the marketing quality that has sparked strong beef demand.
Led by strong advocacy from Sens. Chuck Grassley (R-Iowa) and Linda Fischer (R-Nebraska), the bill to mandate cash trade passed through committee, but didn’t get full Senate or House votes.
Where the issue goes from here, just as cash trade rebounds and leverage has dropped for packers, is anyone’s guess.
Asian export demand soars
The value level of beef exports went to new heights in 2022, averaging $925 million per month. Much of the growth is driven by Asian markets, and the demand in China has been especially noteworthy. Through August, exports to China increased 25% to 193,511 MT, while value was up 38% to $1.77 billion.
South Korea continues to lead as the highest value. A duty-free provision was enacted on imports in that country. Through August, exports went up 4% above 2021’s record pass, and value jumped 28% to $1.93 billion total.
Packing plant capacity in limbo
Since 2020 there have been several publicly announced plans to increase beef packing capacity across the country. A big announcement came earlier this summer when Kingsbury and Associates and Sirius Realty unveiled their plan to construct an 8,000-head-per-day beef and bison processing facility in Rapid City, South Dakota, over the next three years. This would create the largest beef plant in the country. However, due to current events such as cow herd liquidation, inflation, labor shortages and increasing interest rates, some previously announced projects are changing their timelines or pausing construction entirely.
Inflation impacting producer margins
Producers’ share of the retail value of beef increased from 2021. However, rising input costs, especially for cattle feed, has limited how much producers can benefit from higher cattle prices. Based on commodity cost and return estimates from the USDA’s Economic Research Service (ERS), feed expenses are the largest operating cost for cow-calf producers, comprising 75% of costs in 2021. In addition to rising feed costs, elevated fuel prices and labor costs have also taken a bite out of producer margins.
Drought hits industry hard
With much of the U.S. suffering from the worst stretch of drought in at least a decade, hay and forage supplies have taken a hit. As of Oct. 25, about 63% of the country was experiencing drought conditions, according to the U.S. Drought Monitor, which indicates vast swaths of California, the Great Basin and the Great Plains as being under extreme or exceptional drought. Around 70% of U.S. corn and hay production occurs in areas going through drought in 2022. Producers across the country have felt the squeeze, as a lack of feed and water has led to one of the biggest national cow herd liquidations in recent memory.
Record-high slaughter numbers
Driven largely by effects of the aforementioned drought, total U.S. cattle slaughter rose in 2022. Many heifers that would normally be kept as replacements were instead sent to feedlots and eventual slaughter.
USDA’s National Agricultural Statistics Service (NASS) reported August beef production at a record 2.51 billion pounds, 6% higher than the same time last year. As of August, total cattle slaughter for the year was 22.49 million head, 1.8% ahead of 2021. Heifers accounted for over 30% of that total at 905,000 head, 6.2% above the five-year average. Cow and heifer slaughter accounted for just over half of all cattle processed between January and August 2022, a development that will likely be the start of a chain reaction that will have a major impact on cattle inventory for years to come.
Environmental regulation changes in 2022
The Biden administration’s December 2021 executive order announcing national net zero and clean energy goals sparked an increased focus on environmental stewardship in the ag industry. Several environmental policies that will significantly impact the beef industry are, as of the deadline for this article, currently under debate among U.S. lawmakers, including the Clean Water Act, Waters of the U.S. and Biden’s 30×30 conservation plan. More developments in those policies are expected in early 2023.
Veterinary Feed Directive changes coming June 2023
As of June 2023, Veterinary Feed Directive amendment “Guidance for Industry #263” will come into effect, removing any of the remaining antimicrobial medications still available for purchase over the counter and requiring all medications falling under this new rule to contain a label stating, “Caution: Federal law restricts this drug to use by or on the order of a licensed veterinarian.” These products include oxytetracycline and related products such as LA200, LA300 and products containing penicillin, tylosin, sulfadimethoxine and sulfamethazine. Begin asking your local farm store now if they plan on still carrying these products through a prescription status and what that may look like for you as the operator.
