Kevin Good discusses demand, leverage and profit potential for cattlemen.
“Beef demand is great.”
That message from Kevin Good, CattleFax vice president of industry relations and analysis, is a stark contrast to what cattlemen in similar seats would have heard just two decades earlier.
“If you look at the last 20 years, you’ll see that beef values, both wholesale and retail, have increased at over double the rate of inflation,” Good said. “There’s plenty of dollars in the system. We just want a bigger piece of that pie.”
From 1980 to 1998, beef’s market share dropped from 54% to 40%. Compared to other proteins, beef has regained 8% of that back, and 2% of that recovery in market share was won last year alone, Good said.
He credited much of that rise to the cattle industry’s commitment to raising a better product. One out of every four carcasses today reaches upper two-thirds Choice [the marbling level required for the Certified Angus Beef ® (CAB) brand]. Combine that with the surge in Prime reaching above 10% of the harvest many weeks.
One out of every four carcasses today reaches upper two-thirds Choice.
“That’s over a third of the cattle we produce are in that premium line from a quality standpoint,” he said.
Leverage is still the frustration of those on the live cattle side of the equation. There’s no shortage of finished animals, as the backlog from COVID-19-related disruptions continues to work through the system.
Good said there are two ways to “get out of this mess”: placements and harvest.
Import and export data with Mexico and Canada show fewer feeder cattle coming in and a larger number going out, leaving the trade balance with 350,000 to 400,000 head fewer in the United States.
Feedlot placements have been down every month since June.
Labor issues continue to hamper packing plants, but the number of cattle on feed 150 days and above peaked four months ago, with each month getting a bit smaller.
“Combine that trend with tighter supplies going forward, and it would suggest we are starting to gain some leverage from fed-cattle marketing standpoint as we move forward,” he predicted.
How fast will that come? Not in the third quarter, Good said, but a rising price trend in the fourth quarter will continue into 2022 when there’s a 500,000-head reduction in harvest numbers.
Another point of optimism comes from overseas demand. Overall exports are up 15%, and imports down 8%.
“That’s a 23% swing on a 3-billion pound market. We’re optimistic that exports will continue to increase,” Good said.
Australia’s drought-limited herd and an increasing appetite for beef in China and other Asian countries certainly works in the U.S. cattleman’s favor.
“Despite the fact we’re producing 2.5% more beef this year than last, we’ve got tighter per capita supplies,” he said.
CattleFax predicts prices for all classes of cattle will move up this next year.
“We do see profit in the system for the cow-calf producer moving forward if Mother Nature will cooperate from a feed standpoint,” — Kevin Good, CattleFax