CALF_News_October_November_2021

20 CALF News • October | November 2021 • www.calfnews.net T hat’s what longtime CattleFax analyst Kevin Good told beef producers during the annual CattleFax Outlook at the 2021 Cattle Industry convention this summer in Nashville, Tenn. Now add beef demand to the equation – which is the best it’s been in 30-plus years and will likely continue – factor in the basic economic law of supply and demand, and what do you get? Higher cattle prices across the board. Looking back to a darker time in the beef business, Good said market share for beef, compared with pork and poul- try, dropped from 54 percent to 40 per- cent from 1980 to 1998. “We’ve gained back 8 percent of that market share since then and 2 percent last year alone.” The headwind, particularly in theWest and Northern Plains, is drought and the liquidation it has caused. Beef cow slaughter this year is up close to 10 per- cent over last year, and a higher percent- age of heifers that were originally held for replacements are now in feedyards. “And with what we see as far as heifer placements and the drought, we would suggest that we’re going to go through a mild liquidation next year, particularly in the western half of the U.S.,” Good said. “At the same time, there will be spots because of the profitability in calf values, that we’ll start to see some expan- sion in areas that have better moisture conditions.” With beef cow liquidation expected to continue and the dairy herd expanding, Good said to expect roughly another 1.2 million head liquidation in beef cows and a 200,000 head increase in dairy cows. “So over the next three to four years, we should expect the harvest level to decline by about a million head on an annual basis. We suggest that about half of that will occur next year.” Looking at the July 1 midyear cattle report, feeder cow and calf supplies outside feedyards will be down around 600,000 head. “So even though we’ve got a loaded cattle-on-feed number on the front end, we are going over the hump from a supply standpoint.” Indeed, market leverage is all-impor- tant. Packers and retailers have had their hands on the lever the past few years as cattle supplies were higher. That leverage is now in the process of swinging back to producers. Crunching the numbers, here is the CattleFax outlook for cattle prices in 2022:  FED STEERS are predicted to average $135/cwt., up $14 from 2021, with a trading range from $120 to $150.  800-POUND FEEDER STEERS should average $165/cwt., up $20 from this year, with a trading range from $150 to $180.  550-POUND STEER CALVES should average $200/cwt., up $30 from 2021, with a trading range from $170 to $230.  UTILITY COWS should average $70/ cwt., up $6, with a range from $60 to $80.  BRED COWS are predicted to sell for $1,750/head, up $125, with a range from $1,600 to $1,900 on load lots of quality, running-age cows. Here are some market factors that bear watching, according to CattleFax:  PACKING CAPACITY – Packing capac- ity has remained barely adequate in 2021 as plant slowdowns and labor challenges have limited output. Uti- lization and capacity should improve over the next few years.  CATTLE MARGINS – Historically low margins have challenged producers, from cow-calf to feedyard, for the last several years. Expect margins to improve as the cattle supply tightens and producers gain leverage from packers and retailers.  TRADE – U.S. beef exports have trended higher the past few years. Expect continued growth into next year. Tighter global protein supplies should support U.S. red meat and poultry values and export growth through 2022.  ECONOMY – The economy has made gains in 2021 and should stay stronger with low interest rates and govern- ment stimulus fueling consumer As Supplies Tighten and Demand Remains Strong, Leverage Will Return to Beef Producers CattleFax analyst Kevin Good outlined the cattle price forecasts for 2022. Beef demand is there and dollars are in the pipeline as consumers pay for Choice and Prime. Now the pump is primed for beef producers to gain a larger share of those dollars. CATTLEFAX SEES HIGHER PRICES COVER STORY By Burt Rutherford Contributing Editor “The message as we go forward, not only through the remainder of this year and next, but from a longer term perspective as we build into the next three to four years, is we are going into tighter supplies.”