Is the Cattle Industry Set Up to Repeat 2014?
Dry Conditions. Unabated cow slaughter. Record Prices. This list of known factors weighs on the unknowns of the future to be seen in the cattle markets and industry.
Scott Brown, University of Missouri associate extension professor in agricultural and applied economics, joined “AgriTalk” to discuss some of the looming cattle industry factors and how they might play out in the coming months.
Drought
Dry conditions have been a topic of conversation for several months in many parts of the U.S., as producers are running short of pasture and hay supplies to make it through the year.
Currently, much of the severe drought areas sit atop the largest beef cow states, including Texas, Oklahoma, Missouri, Kansas and Nebraska.
“I think we're starting to find this being close to where we were in 2012. I wouldn't have said that a few weeks ago, but right now, I'm worried about where we're going,” Brown says.
In 2021, North Dakota, South Dakota, Montana and Nebraska faced drought, while 2022 has brought the addition of Texas, Oklahoma and Kansas to the list of dry areas and continued herd liquidation.
Beef Prices
“We might be able to find a little bit of cheaper ground beef than we've seen for a while as we are talking about an increase in cow slaughter that's really been with us all year long,” Brown says.
Consumers are not showing much weakness in their dollar, despite record high inflation and talk of a recession. Recent employment data shows the average hourly earnings are up 5.2% year over year, which might help buoy demand.
However, beef prices are down relative to a year ago, indicating consumers may be “buying down” in terms of the most expensive beef products, Brown adds.
Cattle on Feed
“There’s been a lot of discussion that [we] already expect some cuts, yet the feedyards are full. I actually think we have to get into 2023 and maybe late spring or summer before we start to really see what, I think, will be much shorter numbers that should give us some potentially higher prices,” Brown explains.
Currently, production for the third quarter remains relatively steady with 2021; therefore, Brown doesn’t expect to see much change for the remainder of 2022.
Cow Liquidation
Not only do drought and limited feed resources cause cow liquidation, Brown notes a lack of profitability plays a role in this as well.
“Folks that have chosen to get out of the business tend to be smaller, older producers. There's no one coming behind them to keep the cow herd. Those changes don't turn around right away,” Brown adds.
Cattle Prices
Although what looks to be the perfect storm to see near 2014-levels of cattle prices, Brown is reluctant to say the industry is headed towards record prices.
“I think that it is the economy that could derail all this positive… I don't like record prices because of a downturn in supplies. I want record prices because of strong demand,” Brown explains. “I don't like how we are necessarily getting here, but it sure looks like we're set up for some extremely high prices.”
