Peel predicts fairly good year for cattle producers
Published on Feb. 29, 2020
Beef producers are wondering what the cattle markets will be like this year, and also what they’ll have to spend for feed. Oklahoma State University Extension Livestock Marketing Specialist Derrell Peel says it looks like this may be a fairly good year for cattlemen.
“The beef industry in the U.S. has been in a cyclical expansion the last five years. Cattle inventories and herd size bottomed in January 2014 and have been growing ever since,” says Peel. “We’ve added more cows, the primary source of supply in the industry.”
“We’ve added about 2.8 million beef cows in the last five years,” he says. “Beef production goes up as well, with a year-and-a-half to two-year lag by the time the calves turn into beef.”
Supplies were low in 2013 and 2014, which helped bump market prices to record highs.
“Now everyone wants to use those years as a reference, but those high prices were due to an unusual set of circumstances that will probably never happen again,” says Peel.
“It was great for a while, depending on which part of the industry we were in, but the market has certainly come down from those prices,” says Peel. “Even cyclically, we’ve come down some, but the other side of it is that even though beef production has gone up, beef demand has matched it.”
“Beef production has risen 14 percent over the four-year period since the low in 2015, and prices have held up relatively well, due to strong domestic and international demand for beef,” he says.
“From 2019 to 2020, we’re near the peak of herd expansion. Numbers have probably stopped growing, herd numbers may have even gone down slightly from 2019. I don’t think numbers are dropping very much, because prices haven’t really gone low enough to pressure producers to liquidate,” he explains.
“We’re kind of holding this cyclical plateau right now. Beef production will probably grow just a bit more in 2020, but probably less than one percent,” he says. “It will peak, and if the herd inventory stabilizes in 2020 we will work our way through the last larger calf crop and probably peak out beef production in 2020 as well.”
Compared to growth during the past four or five years, beef supply has stabilized and probably won’t change much.
“As long as demand stays good or continues to grow, we have a chance for some improvement in cattle markets. On average, we think cattle prices will be steady to somewhat higher in 2020,” says Peel. “I wouldn’t say they’ll be dramatically higher, but probably a little higher on an annual basis.”
“Certainly we had problems in the second half of 2019 and the market was really weak until the very end of the year. Calf prices in the fourth quarter were quite a bit lower than a year earlier. Compared to that, in 2020 we expect to see higher prices by the end of the year. On an annual basis we are probably looking at about three to five percent higher prices but not much more,” he says.
Domestic demand for beef has been a key, which is impressive when we consider what the other meats are doing.
“We’ve had record total meat supplies in the U.S. every year since 2015. For 2020, beef production will be close, if not slightly above, the all-time record,” says Peel. “Pork and poultry production will also be at an all-time record level. We have lots of meat, so if demand falters for any reason, this could create a problem, but it hasn’t, for the last two or three years.”
“It actually looks better this year because we’ve resolved some of the trade issues that impacted exports of meat. Our exports look a little more promising at this point,” says Peel.
Barring any general economic problems in the U.S. that would impact overall consumer demand, which is unlikely, markets should stay stable.
“The economy has done pretty well and the trade picture now looks a little better, so we think the demand will continue to handle the record meat production. This gives us a chance to have stable to slightly higher prices for meat in 2020,” he says.
“In terms of grains or supplemental feeds, we currently have relatively large supplies of corn and soybeans,” he says. “We don’t use as many protein feeds in the beef industry as the pork and poultry industries do, but we have ample supplies. We anticipate slight increase in feed prices but not enough to dramatically change the feed market, which directly affects feedlots.”
“If cost of gain goes up dramatically, that factors back into their demand for feeder cattle and prices they can or will pay for feeder cattle,” says Peel.
“We don’t see this being a major problem at this point, but every year we must grow another crop,” says Peel. “We could have some problems before the year is over, but it would be on the heels of some sort of production issue that would have to develop later this year.”
“At this point, it looks like we have ample supplies,” he says.
The trade picture probably will help American farmers export a little more grain, mostly soybeans, but corn markets can benefit from trade as well.
“Yet, I don’t think we’ll have dramatic increases in feed prices,” he says.
Hay is more of a regional market, depending on weather. Drought during growing season or too much moisture at harvest can affect supplies and prices.
“Hay prices are more localized. We had a lot of weather problems in 2019, it was a cold, wet spring, and then too much moisture, in many cases,” says Peel. “Some growers couldn’t put up the quantity or quality they normally do.”
The dairy industry sees quality issues quicker, but their requirements affect the hay market for beef cattle.
“Right now, we probably have marginally adequate supplies of hay to get through this winter, but for some areas and some producers it will be an issue. The hay market will also depend on what we do this year to replenish those supplies,” says Peel.
“I’ve been watching trade and policy issues, and I’ve been nervous about those for several years, but now we’ve gotten through those in better shape than I thought we would,” he says. “Now it actually looks like we’re past some of the worst of it. I am hopeful about 2020. I don’t think it’s going to be a dramatically higher year in terms of prices, but probably a more solid year.”
“Overall, we will probably be in better shape, but mustn’t forget markets can be volatile from the standpoint of global tensions, and the fact it’s a presidential election year,” says Peel.
Heather Smith-Thomas is a corresponding writer for the Wyoming Livestock Roundup. Send comments on this article to firstname.lastname@example.org.