The months ahead look positive for the beef industry, especially at the cow/calf level, according to a global outlook report from Rabo AgriFinance senior protein analyst Don Close.
Close, well-known market pundit within the beef business, provided his thoughts on the U.S. economy and global beef markets into 2021 at a webinar sponsored by the American Feed Industry Association. He said he expects to see cow liquidation in the U.S. continue into 2021, a number tied closely to how much drought expands. He estimates U.S. beef production for the year to be up 1 to 1.5%. This is due to both cow liquidation and a backlog of feeder calves, which he puts at around a million outside of feedyards.
"The lion's share of that million head outside of feedyards is still trying to work through," he said. "Because of that, I think we will still see very large placements through the first quarter of 2021 and into the second quarter."
He added average carcass weights are up 26 pounds compared to a year ago and many analysts think the rally in corn prices will quickly normalize carcass weights. Close, however, doesn't believe the result will be quite so stark or fast.
"Given the foundation we have in genetics plus a 2-billion-bushel carryover of corn, we are not in a situation where availability of feed is going to be a problem," he explains. "It's our expectation on beef production through 2021 that we'll see a 1.5% increase the first part of the year, a lot of that increase and the impact from it having been worked through by the time we get to the second half of 2021.
"By then, we think tighter supplies from increased cow slaughter in both 2019 and 2020 will reduce availability of cattle on feed. We'll likely then see a stronger market in the second half of 2021."
A key area for the beef industry will continue to be export markets, where Close noted the National Cattlemen's Beef Association [NCBA] at its summer meeting set a very aggressive goal of reaching 17% on exports. This year and next, he expects beef exports at the 11 to 12% range.
"Long term, we are on a growth curve. With quality of product, trade agreements and whatever becomes of the U.S.-China Phase One Agreement, we are in a good spot for continued export growth."
Close noted that as sustainability continues to be emphasized, the U.S. is in the enviable position of representing 20% of global beef production, with just 8 to 10% of global cattle numbers. He said the U.S. is "hands down the most efficient beef producer in the world right now."
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