Us Beef Industry Supply and Demand
Introduction
At first glance, 2022 cattle prices are higher than 2021. At $140, slaughter steer prices are 17.v% above 2021 prices, but fifty-fifty with higher prices, farmers and ranchers will travel a rocky road to profitability, paved with inflation and higher input costs in 2022. This Marketplace Intel addresses the USDA's Cattle on Feed report released on Friday, May 20, 2022, the forces driving cattle prices higher and how inflation and input costs will affect the bottom line for cattle farmers and ranchers. It will further walk through the combination of supply and demand factors that volition affect the 2022 market outlook for livestock producers.
Supply - Inventory
The Annual Cattle Inventory Report published by USDA estimated overall inventory on Jan 1, 2022, is down two% or 1,887,700 caput from 2021. Cattle inventory is important with respect to the market place outlook because it quantifies supply and where the industry lies in what is known as the cattle bicycle. The cattle cycle is the waves of expansion and contraction of the total number of U.South. beef cattle in consecutive years. The cattle cycle is a response to farmers' and ranchers' perceived profitability of the beef cattle industry over roughly a 10-year menses. For this Market place Intel, we are going to focus on the strength behind cattle inventory, the breeding herd and calf crop.
The calf crop for 2021 came in at 35.ane million head, a 1.two% decrease from 2020. As of January 1, 2022, moo-cow inventory totaled 30.i million head, down 2.iii% from 2021. Heifer inventory with total heifers at nineteen.8 1000000.
The last piece of this puzzle is supply and slaughter. Commercial cattle slaughter for Apr was 2.81 million caput, down slightly from 2021. Steer slaughter was 1.33 million, iv% lower than 2021. Heifer slaughter for the month of April came in at 825,200, .05% lower than this time in 2021. Cow slaughter for the calendar month of March came in at 640,382, 7% higher than the same time in 2021. It's important to acknowledge the decrease in slaughter in all commercial cattle and the increase in cow and heifer slaughter. This illustrates industry position in the cattle cycle. Effigy 1. illustrates the electric current and past 2 cattle cycles.
Based on Figure 1., the beef cattle industry is inbound the contraction portion of the cattle cycle. Cows and heifers make upwardly the convenance herd, which is responsible for supplying the calves entering the cattle inventory at any point during the cattle cycle. Increased moo-cow and heifer slaughter will event in a smaller dogie ingather and inventory in the upcoming months of the cattle cycle. It is natural to conclude that future inventory will exist down since the dogie crop, cow and heifer inventory are all failing. However, the southern Plains are experiencing extreme drought and information technology is not uncommon to remove grazing animals from forage early for placement into feedlots nether these circumstances. The movement of cattle from grazing to feedlot placement or vice versa tin throw off inventory numbers.
Pasture and range land had a crude kickoff in 2022, especially in the Western regions and southern Plains. Winter weather and rain have brought some greener pastures to the upper Midwest but USDA crop progress reported more than fifty% of U.S. pastures are yet rated poor to very poor compared to only nether 50% reported in that condition last year. This can be compared to the five-year average of 26.6% of pasture and rangeland rated poor to very poor. A previous Market Intel published in May 2021, demonstrated how 2021 started off with record breaking drought. While more green grass in the Midwest is likely to slow the in a higher place average cow slaughter and placement of grazing animals into the feed to slaughter supply chain, much of the U.S. is nevertheless facing drought weather condition in 2022. Figure two. & Figure 3. illustrate the deviation in the U.S. Drought Monitor betwixt May xviii, 2021, and May 17, 2022. There has been comeback in the overall drought situation, but much of the southern Plains are still rated as extreme or exceptional drought.
Cattle On Feed
USDA National Agricultural Statistics Service'south Cattle on Feed (COF) program is a monthly feedlot survey conducted on feedlots with a capacity of 1,000 or more caput. The April COF study estimated feedlot placements to be one.99 meg head, slightly beneath 2021 levels.
The May COF report, released on May 20, 2022, estimates cattle on feed equally of May 1, 2022 to be 12 1000000 caput. This is upwards ii% from a year agone. The full number of cattle placed in feedlots is 1.81 meg caput, down one% from last year.
While the report fails to explain how feedlot placements are even with final year while inventory numbers and dogie crop are down, drought may exist a part of the answer. Much of the Western United States, too every bit the southern Plains, have experienced or are continuing to experience drought conditions. When this happens, it is non uncommon for ranchers in the Southern plains to move grazing cattle off wheat early on. It is also a possibility that heifers previously listed as replacements are beingness placed into feedlots. Adjustments to Jan. one inventory numbers are not uncommon and may amend reflect the situation as 2022 continues.
Demand
USDA Economic Research Service (ERS) forecasted 2022 total red meat and poultry consumption at 222.7 lbs. per capita, down from 224.2 lbs. in 2021. The per capita scarlet meat and poultry disappearance is forecast to subtract. ERS defines per capita meat disappearance equally the measure out of the supply available for use in domestic markets including fresh and candy meats sold. When supply drops, beef prices may ascension. If beef prices rise, consumer need for beef may fall.
The spread between beefiness graded "USDA choice" and "USDA select" has narrowed in recent days. This spread is important considering it can oft illustrate consumer willingness to pay for choice beef, a product that costs a premium to a higher place beef products graded select. All primal (wholesale cutting) values have seen a decline in 2022. This tin be interpreted as a consumer response to inflation; consumers looking to salve money.
Imports
Domestic imports are an of import cistron in evaluating U.S. demand for beef. USDA ERS reports U.South. beef and veal imports were 353.77 million lbs. in March 2022, 29% higher than this time in 2021.
The greatest increase in U.South. imports is from Brazil. Record loftier U.Due south. beef prices, and drought conditions in traditional import countries such as Australia are the central motivators for this increase. Some other reason the U.S. has been importing from Brazil is because Cathay, 1 of the earth'southward largest importers of beefiness, placed an embargo on Brazilian beefiness imports in September of 2021. This embargo was lifted in Dec 2021. Nevertheless, Brazilian beef continues to be directed to other markets including the U.South.
There are other factors contributing to the increase in imported beef. One of these factors is the strengthening of the U.Southward. dollar. When the U.S. dollar strengthens, it makes it cheaper for the U.South. to purchase products from other countries. In addition, the decrease in consumer willingness to pay higher prices for beef makes other, less expensive, sources more than appealing.
Exports
Exports fall on the other side of the supply/need spectrum from imports. USDA forecasts beef exports to turn down 1.8% from 2021. This estimate might seem negative at showtime glance, simply it's important to annotation that 2022 beef and veal exports are nonetheless well to a higher place the five-year average. The strengthening U.S. dollar's impact on imports –making U.S. purchases of foreign products cheaper – has the opposite effect on exports; it makes information technology more expensive for other countries to buy products from the U.S.
China, the world's largest importer of beef every bit mentioned before, has been implementing its COVID-null policy which included a nationwide lockdown that has continued for vi weeks. The effects of this policy on the nutrient industry vary past region. Hong Kong, for instance, abode to some of the world's stringent COVID-19 restrictions, has begun to ease restrictions. Overall, beefiness markets are watching closely and waiting for Red china to relax restrictions, leading to increased need for meat products.
Despite these obstacles, March trade data has indicated record U.S. beef exports totaling 303.7 million pounds, 1.two% above 2021. This is the greatest quantity of beef exported for any month of March. Fifty-fifty more impressive is record kickoff quarter 2022 overall meat merchandise coming in at a whopping 845.eight million pounds, 6.2% ahead of 2021. Communist china, South korea, and Nihon continue to pb the pack, being the summit three destinations for U.S. beef. Mainland china posted a record 145.4 million pounds, 61.eight% above 2021.
Input Costs & The Bottom Line
One of the greatest concerns faced by cattle farmers and ranchers in 2022 is rising input costs, more than specifically feed. Iowa State Academy estimates total feed costs per caput for finishing a 760 lb. yearling steer, in March of 2022, are $1,802.58. Feed costs account for 24% of the total cost of product for 2022 at $436.15, up 22% from 2021. The toll of corn was estimated to increase 30.4% and hay upwardly 45%. Non-feed costs were estimated to exist record loftier at $144.19 per head in March upward, 8% from 2021. This brings the suspension-even price to $138.66 cwt, up 12.viii% from 2021. These ascension costs volition make profitability an uphill battle.
Conclusions
The 2022 cattle outlook is a mixed bag. On i hand, 2022 cattle prices are college than 2021. On the other paw, cattle farmers and ranchers face rising input expenses, and dubiousness in the U.South. economy and the economies of key beef importers.
A strengthening U.S. dollar will go far more than expensive for other countries to buy U.Southward. beefiness while at the aforementioned time making it more affordable for the U.South. to import beef from other countries. Yet, commencement quarter beefiness exports were reported at tape levels, primarily to the Asian markets with China leading the manner.
Supply is forecast to decrease; the manufacture is in the contraction phase of the cattle cycle while USDA has also forecasted a modest subtract in consumer need for meat. If nosotros employ history every bit a guide, then the cattle industry should exist in the concluding couple years of wrinkle in inventory before commencement the expansion phase of the next cattle wheel.
Cattle farmers and ranchers are facing increases in both feed and non-feed input costs resulting in increased intermission-even prices. Whether cattle prices will increase enough to beginning the increase in costs and provide profitability remains in question. All these factors create a complex cattle market outlook consummate with many peaks and valleys for 2022.
Source: https://www.fb.org/market-intel/cattle-supply-and-demand-issues-for-the-2022-marketing-year
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