Angus VNR: Demand Drivers Bring Opportunity
Current dynamics–with a worldwide pandemic and market disruptions--are an exclamation point on the need for new sources of optimism in the beef market.
“We in agriculture need to wake up every morning, looking for those demand drivers so that we can see if there's a new demand trend that's coming forward. Maybe it's China in terms of buying more US corn or importing more US soybeans or beef or pork. But I'm concerned longer term that without a demand driver, the market's lack of story, unless you're going to be looking at a weather abnormality and grains or maybe something that's export related to in the meat markets,” says Dan Basse, President of AgResource Company.
Basse says the industry has long focused on helping farmers produce more, but the challenge is on the other end of the equation.
“So I would really like to get agriculture behind a platform that we think about not only spending on ways to help us farmers produce more, but help consumers consume more because at the end of the day, that will be the key to terms of our profitability,” he says.
Government support makes up a larger part of farm revenue in 2020 than it ever has before, yet overall farm income has been flat.
“Of course, we've got net farm income that's down about 47% from where we were back in 2012. I don't know of another industry in which an income level has fallen net much and stayed at that level for so many years. Gross farm income has also come down. But again, we need to see a new demand driver for you to get this all changed around,” Basse says.
The foodservice industry is still struggling as public health directives and health concerns keep diners at bay.
“Roughly $1.05 trillion or 5% of our US economy is due to agriculture. But more importantly, it's this foodservice eating and drinking places that are the big contributors. I say this is one of the big drivers of US agriculture, the one bull driver that we need if we're going to be coming out of this land of margin parity,” he notes.
Basse predicts that normalcy in beef trends will return by next summer, and that’s the real market driver cattlemen should keep their eyes on.
