Economy stimulating consumers to spend more for beef
Torrington – Sharing the latest quarterly domestic product report, University of Wyoming Extension Marketing Specialist Bridger Feuz said the report for beef has been positive the last several quarters due to a consistent economy and consistent moderate growth. Solid growth has stimulated consumer confidence in products like beef.
Feuz spoke to more than 100 cattle ranchers during the Southeast Wyoming Beef Production Convention in Torrington, on Nov. 20.
“The consumption of beef has been pretty steady, but poultry is increasing year after year in per capita consumption,” he said.
Despite that, beef per capita consumption is expected to increase again in 2019 and be at least stable in 2020.
Feuz explained, “Consumers are willing to spend more of their disposable income on beef than on pork or poultry. It has been growing the last few years, but we expect it to level off in 2018.”
Although Feuz won’t have any new USDA data to share until January, predictions are for continued growth in cattle numbers through 2019. The cow inventory grew 1.6 percent last year, and growth is predicted to be more than one percent for 2018 and possibly 2019.
While most of the growth is in Texas and South Dakota, Wyoming is seeing declining cow numbers, Feuz said. Wyoming ranchers have 714,000 stock cows, and growth was flat in 2017 and 2018, he explained.
In the last 10 years, cow numbers have declined by 9,000 head in the Cowboy State.
In the U.S., Feuz said growth is slowing in terms of the number of heifers held back for breeding.
“Last year was the first year ranchers didn’t hold back as many heifers. I think we are starting to see signs that the growth of the cowherd is slowing down,” he said.
Meanwhile, Feuz expects to see an increase in numbers of cattle on feed in 2019.
“What is somewhat concerning to me is that the number of cattle on feed over 120 days has been higher than the five-year average. It could indicate cattle are being fed longer because the demand from the packer isn’t there,” he said.
Feuz also sees a gradual increase in beef that is in cold storage.
“I am hoping it moderates like it did last year, but if it continues to build, it could indicate too much production,” he said. “We are continuing to produce more beef as the world population continues to grow, but we have to be careful that production doesn’t outgrow demand.”
Overall, Feuz anticipates red meat and poultry production growth to slow in 2019.
Lower calf prices
Consumer confidence and the export market are the main drivers that have helped support calf prices, instead of the $10 to $12 lower that was expected, Feuz said. He anticipates lower calf prices until 2020, when the market is expected to improve.
The current outlook for 500- to 600-pound steers is $1.70 to $1.78 in third quarter of 2019, dropping to $1.64 to $1.74 in 2019’s fourth quarter. Comparatively, Feuz says 500- to 600-weight calves are trading at $1.65 to $1.67 this quarter.
Usually, when the herd is growing, producers need more feed, which contributes to high prices.
“We haven’t seen that this time,” Feuz said.
The five-year average price of corn was $4.50, but corn is significantly below that at an average of $3.25.
Alfalfa and other types of hay are slowly climbing in price and are coming closer to the five-year average, Feuz said.
“Input costs are the biggest variable when talking about cattle prices. We have enjoyed relatively low feed prices, in terms of corn, during the last few years. The hay markets have fluctuated a little more,” he said. “However, we always need to keep it in the back of our mind that we are only one drought, or flood at the wrong time of year, from having a bad corn crop. Input costs are still variable.”
With lower feed prices, Feuz thinks feedlot profitability has improved in the last few years after a dismal year in 2016.
Japan and South Korea were strong export markets for U.S. beef in 2018, with Mexico showing some slight growth, and Canada showing steady.
“Overall, the U.S. is usually a net beef importer, which means we import more beef than we export,” Feuz said. “This year, we have been a net exporter most of the year, shipping out more beef than we have imported.”
In 2017, the U.S. exported $2 billion more total product than it imported.
“Generally, even though we are a net beef importer in terms of weight, we are a net beef exporter in terms of dollar value,” Feuz said.
Gayle Smith is a correspondent for the Wyoming Livestock Roundup. Send comments on this article to firstname.lastname@example.org.