By Megan Webb, Ph.D., Contributing Editor
Cattlemen do not often have the time to celebrate, but I encourage you to try to take a moment for yourself, your family and friends. You’ve made it through another year navigating COVID, facing a limited supply of raw materials and labor, and increased feed, fuel and input costs. Staying afloat was an accomplishment in and of itself, and that is something to be cheerful for! For those who have weathered the storm, I assure you there will be dividends in the months to come.
Already, cattlemen are feeling more positive pressure from strong beef demand in 2022. Some reasoning is because of the tighter cattle supply, lighter carcass weights and the demand packers have to maintain harvesting 650,000 to 660,000 head per week to satisfy strong domestic and international beef markets. Understandably, we cannot perfectly predict the future such as challenging winter weather conditions, dreadful feed and input costs, and the duration of the labor shortage; however, I believe we must focus on the positives and see how 2022 gives us all a fresh start!
Silver Linings in 2022
A silver lining is on the horizon in 2022 due to the combination of increased harvest capacity and a smaller total beef cow herd. Harvest capacity has increased up to 25,000 head per week on top of a projected 500,000 cattle population decline due to previous drought conditions and reflected higher feed costs. Over the next few months to years, this combination should help to restore market leverage back to producers.
In 2022, cattle are expected to trade higher and prices are expected to improve over the next three years. The supply of cattle is beginning to get more in line with the packing capacity and that’s good. There is some risk in extending the harvest capacity too much beyond tightening cattle supplies. Producers should monitor the herd size, as the increased harvest capacity now permits a size of around 30.5 million cows.
Producers should also have more tools available to access alternative marketing agreements or contracts available between packers and producers to better benefit their operations to meet current demands. This is due to the recent Cattle Contract Library Act passed by the House Agriculture Committee in October. If passed by the Senate, it will permit the U.S. Department of Agriculture to maintain a searchable database for producers to access details of agreements or contracts available between packers to producers, nationwide.
This transparency would allow producers to reflect on the inventory needs of packers and improve or change their management practices to better meet their desired base or premium target price. Now more than ever, there may become an opportunity for producers to review and reflect available contracts and emulate practices that could reward higher base prices or premiums to benefit their operations across the nation. The question is, will this reflection of greater transparency cause a positive production change by producers to better benefit their cattle operations on top of favorable production outcomes?
Some of the favorable production outcomes include strong consumer demand for beef in the United States and globally. This is especially true with lesser available U.S. protein supplies and a growing population. Further, restaurant and retail beef should remain strong as consumers have demonstrated they are willing to pay more for beef. There is beef industry optimism fueled by strong demand. Retail beef prices pushed to an annual high in 2021 to $7.11 per pound.
The 2022 redistribution will lead to improving cattle value for beef producers remaining in the business. Aftershocks from the pandemic will continue to keep domestic demand at elevated levels. Government stimulus and unemployment benefits are fueling the economy, with demand outpacing available supplies as restaurants and entertainment segments emerge from shutdowns. High-quality beef that with accessibility to delivery or food service will be favorable.
Out of the challenges of 2020 and 2021, I hope you’ve found what you need to advance your operation, its versatility and ultimately add more strength to it. At the end of 2020, I had mentioned that I was proud of my ability to continue to “adopt” what was not planned and be satisfied with the progress in its new form.
In 2021, I must say, I’m proud of my resilience to keep finding ways to move forward, and I am sure you are too. I’m excited to discover what story we will be reflecting upon in 2022. I hope any challenges you’ve faced have delivered you a silver lining, made you stronger and brought new opportunities to your operations for your best position in 2022!
I wish you, your family and operation the best of luck in this new year. We have much to be grateful for. Cheers!
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