Green Light for Cow-Calf Prices

Seven Reasons the Cattle Market Will Keep Gaining

Victoria G Myers
By  Victoria G. Myers , Progressive Farmer Senior Editor
Supply and demand fundamentals are in favor of the production side of the cattle business for the next few years. (DTN/Progressive Farmer file photo by Dan Miller)

Veteran market analyst Kevin Good just gave America's cow-calf producers the green light for higher prices, looking all the way into 2025. It's old-fashioned supply and demand at work, with consumer demand, export demand and increased processing capacity all expected to play key roles in just how high prices go.

Good, who started working with CattleFax in 1982 and today is vice president of industry relations for the organization, covers the fed cattle markets and analyzes supply and demand, production trends, weather and other factors that affect the cattle and commodity business. He presented his most recent market overview as part of a virtual media roundtable, sponsored by Zoetis.

The analyst's outlook for the cow-calf sector highlighted seven factors that all appear to line up in favor of producers moving forward.

1. Leverage is going to shift. There have been plenty of complaints about packers having all the market leverage, especially last year. That's all changing as things swing back in favor of producers. Leverage, noted Good, is that 40-hour plant capacity and the number of cattle harvested weekly. The last four to five years as supply increased, it outran capacity, and demand was not strong enough to counter that. Moving forward, though, supplies of cattle will continue to decline, and at the same time, existing processing plants are expanding, and new ones are being built. This expanded demand means the leverage component shifts away from packers, with more dollars moving into the hands of cattle producers.

2. Inventory liquidations continue. Looking at beef cow inventory, Good said that for 2021, the herd is forecast down 180,000 head. For 2022, another 400,000 head will likely drop out. Looking to 2023, he said the industry may well be down another 250,000 head.

3. Beef demand the best in 30 years. Since 1998, the Retail Beef Demand Index shows increases of 4.4% yearly at the retail side, 4.5% at the wholesale market side, and 3.2% at fed cattle market side. For the 2020-21 season, beef demand is projected to be at its highest level in three decades, said Good. In addition, since 1998, beef market share has increased from 40% to 48% -- up 2% in 2020 alone, when compared to poultry and pork market share at the retail spending level.

4. Steer and heifer slaughter numbers drop. Looking at the 2021 season, Good said steer and heifer slaughter will be up 28% compared to 2020, as the cleanup due to slowdowns in processing from COVID-19 and other challenges pushed processors. But moving toward the last quarter of this year, and then into 2022, that level will drop, with a reduction for the year of 1.8%, or about 490,000 head.

5. Exports are strong and growing. For the 2021 season, beef export numbers are projected to be up 15%, a trend expected to continue into 2022, when Good says those levels may well climb another 5%. Key export areas are China, Japan and South Korea.

6. Price expectations. Over the next 12 months, Good said, the expectation is for higher prices -- probably the highest since November 2015. He said the cash market is still under-range compared to the futures market, and he anticipates better to come.

7. Dairy side growing. Good noted large changes in the dairy industry over the last few years, one of which is the use of beef-on-dairy genetic crosses. Dairy cow inventory has been growing, with 100,000 additional head forecast this year and another 50,000 head for 2022. The growth and vertical integration in this production area, he said, will be key in the future to help beef meet demand in both its domestic and export markets.


Editor's note: To read more about how beef genetics are playing a key role in dairy expansions, see this author's overview of the issue from 2020, "Beef Brings Dairy a Profit Boost":….

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Victoria Myers