There appears to be light at the end of the tunnel for cattle farmers, who have endured a long stretch of stagnant prices, rising feed costs and drought in many portions of the country.
Government and private projections both suggest the cattle market could shine in the months ahead and into 2022, perhaps offering improved prospects for profitability.
“We’re not out of the woods quite yet. We still have quite a few cattle on the front end that we need to chew through going through the remainder of 2021,” Kevin Good, vice president of industry relations for CattleFax, told the RFD Radio Network this month at the Cattle Industry Convention in Nashville.
“At the same time, this will be the third year in a row for a smaller calf crop,” the analyst noted. “Feeder cattle supplies outside feedyards are down about a half-million head compared to a year ago.”
USDA on Friday pegged the inventory of cattle and calves on feed for the slaughter market at 11.07 million head as of Aug. 1, down 2% from a year ago. Placements in feedlots in July totaled 1.74 million head, down 8% from last year and the third consecutive month of lower placements, according to Rich Nelson, chief strategist with Allendale Inc.
“This should tighten up the first quarter cattle supply,” Nelson told FarmWeek. “Overall, it did show what’s still, in our view, kind of a structural supply change going on in the industry, which will certainly give us a lower supply as we get into 2022,” Nelson told FarmWeek.
Meanwhile, marketings of fed cattle in July totaled 1.9 million head, down nearly 5%, but not at trade expectations.
“Today’s (Aug. 20 cattle on feed) report supports what would be viewed as supportive for the 2022 picture and perhaps slightly negative for the front months with weaker than expected marketings,” Nelson said. “Overall, cash cattle prices have been mixed in recent weeks. We expect that to change by September and October.”
CattleFax projects fed cattle prices to average $135 per hundredweight in 2022, which represents a $14 increase from this year.
USDA’s most recent cattle price forecasts follow a similar trajectory. The projected annual average fed cattle price for 2021 was raised $2 from last month to $121 per hundredweight, up $12.70 from the 2020 average.
The Ag Department’s price outlook for 2022 was raised to $126 per hundredweight.
This year’s cattle price projection reflects lighter expected carcass weights due to a higher expected proportion of non-fed cattle being slaughtered through the end of the year. The 2022 beef production forecast was lowered due to tighter expected supplies of fed and non-fed cattle.
Fed cattle prices also have been supported by strong consumer demand, which has grown through the pandemic.
“One out of every 10 head of cattle is grading prime,” Good said. “One out of every four is grading top two-thirds choice. Consumers are getting the chance to taste the top end of our product, and they’re saying that they’ll pay more.”
International beef demand remains red hot as well and currently on a record pace. U.S. beef exports the first half of the year increased 18% from a year ago to 700,087 metric tons, valued at $4.64 billion, the U.S. Meat Export Federation reported.
Compared to 2018, the record year of beef exports, first half results were up 6% in volume and 15% in value.