Bullish on Beef

SAN ANTONIO, Texas (DTN) -- The cold weather here last week during the National Cattlemen's Beef Association convention wasn't enough to put a chill on the 2020 outlook for the beef market.

Crowds packed the annual CattleFax outlook session Thursday, Feb. 6, where analysts for the organization brought mostly positive market news for all segments of the industry.

Longtime analyst Kevin Good, now vice president of industry relations for CattleFax, presented a supply-and-demand outlook that featured a move to a demand-driven beef market and positive export projections. Both will support upturns in price and increased market share.

Beef cow inventory was projected down for 2020, by 375,000 head, and flat for 2021; steer/heifer slaughter was projected up by 250,000 head this year. Exports were anticipated to climb by 5% this year, and imports of beef to the U.S. were projected to drop 5%. The value exports will contribute to beef on a per head basis in 2020 was at the $349 mark, compared to $337 in 2019.

U.S. per capita consumption of all protein was projected up, with beef reaching 58.4 pounds in 2020. All protein producers are expecting, and responding to, rising demand for product with a total increase in production of beef, pork and poultry combined at 2.8% (beef alone was 2.1%). Beef is expected to continue to get a bigger piece of consumer spending, however, at 48%, while pork is at 22% and poultry at 9%.

Price projections for the remainder of 2020, on a hundredweight basis, were $120 for fed cattle (average on a $106-to-$130 range); $150 for a 750-pound steer (average on a $140-to-$160 range); $170 for a 550-pound steer calf (average on a $155-to-$180 range); and $65 on a utility cow (average on a $55-to-$72 range). Bred females were expected to average $1,500 per head (on a $1,200-to-$1,800 range).

On the feed side, the news was good for the cattle industry. Mike Murphy, vice president research and risk management, reported corn supplies would be "comfortable" with stocks to use between 12% and 16%. He expected a trading range for corn in the $3.50-to-$4.00-per-bushel range. Soybeans were expected to end at a 12% to 14% stocks-to-use ratio, with a trading range of $8.75 to $9.75 per bushel. Hay quantity was strong although, in some cases, quality could continue to be a concern.

Randy Blach, CEO of CattleFax, wrapped the outlook with a few longer-range thoughts.

A major point Blach made was that the U.S. beef industry has turned the corner from being a supply-driven market, with a "boom-bust" cycle, to a demand-driven market. As a result, industry profitability is expected for all segments of the beef industry this year. Because the industry is demand driven, he noted the importance of being proactive on issues including traceability, sustainability and food safety, to be sure U.S. ranchers don't lose access to markets. Consumers, he stressed, consider all of these areas as "value contributors."

"Sustainability is our greatest risk as an industry," he said, while noting the U.S. beef industry today has the lowest carbon footprint in the world. He said it is important to tell this story and continue to progress in this area. "Don't take this lightly," he added. "We have to tell our story."

Lastly, Blach stressed the need for two things in the industry. First, he said, cattle producers need a viable cash marketplace for price discovery. Second, he said, the industry has to increase packer capacity.

"Our biggest limiting factor today is harvest capacity," he said. Being able to increase that capacity is the key to opening the door for expansion in the beef industry.

Victoria G. Myers can be reached at Vicki.Myers@dtn.com

Follow her on Twitter @myersPF

(AG)

Copyright 2020 DTN/The Progressive Farmer. All rights reserved.