Cattle market: CattleFax CEO shares statistics to provide producers with confidence in markets
The last year has been a roller coaster, but there might be light at the end of the tunnel for beef producers. The cattle market could be in good shape for a while, and the potential for success could come down to the decisions consumers are making, including Choice over Select.
On a recent Working Ranch podcast, dated April 7, CattleFax CEO Randy Blach gives reassurance to producers, sharing statistics to provide producers with confidence when it comes to the cattle market.
Factors for market
The demand for higher quality cuts of beef, such as Choice, is increasing astronomically, according to Blach. Consumers are seeking out higher quality cuts, and they are willing to pay more.
“Demand for Choice and higher cuts, as well as Certified Angus Beef (CAB) qualified meat has increased 68 percent since the low consumer demand the beef industry experienced back in 1998,” explains Blach.
He shares consumers are wanting more high-quality beef, making it noticeably clear for the market and producers. Producers need to look at the marbling throughout their herds because consumers are willing to pay for the higher quality of meats.
“This same recipe is in play globally,” Blach states. “The U.S. is obviously a major exporter of beef protein – we’ll excess three billion pounds this year. A lot of consumers around the world want the same kind of quality.”
Consumers are buying more than just ribs and loins. They are also buying several cuts out of the chuck and some middle meats.
“Those are all key components which add more value overall through the industry,” Blach says, noting this means more dollars are coming in for U.S. producers – a positive in the market.
Producing quality calves
For cow/calf producers, trying to obtain the most net profit out of a set of calves should be a top priority on their list. As consumers demand more Select beef, producers may need to alter their attention, observing all possibilities on how to achieve the most net profit.
“Cattle producers have to simplify the focus, and they need to be able to balance this with the resources they have available at their fingertips,” says Blach, who continues to explain the importance of managing cost while also maximizing production. “Producers need to maintain tremendous nutrition for these animals and focus on genetics and animal health programs.”
The markets are demanding more information from cattle, meaning producers need to understand their cattle on a deeper level, shares Blach.
“For example, I think most cow/calf producers need to know what those animals are producing and what they look like with the hide off. Producers should be asking themselves if they are really producing cattle that grade 85 to 90 percent Choice or Prime, while also qualifying for CAB certification,” Blach explains.
The more information producers have about how their cowherd performs will allow them to group their cattle together to meet consumer demands. Differentiated markets will begin to determine producers’ profit, according to Blach.
In the last 40 to 50 years, there has always been more shackle space available than cattle. Historically, when the market transitioned in 2016, there was huge loss in harvest capacity.
“This loss has been the biggest bottleneck in the industry, we just haven’t had enough hooks,” shares Blach.
Looking further back, he shares 568,000 head of fed cattle could be harvested each week in 2005.
Blach continues, “If we fast forward to 2016, the packing plants have diminished. The loss of packing plants has resulted in the decrease of 100,000 head per week in slaughter capacity.”
With the COVID-19 pandemic aiding in the closure of several packing plants, there has not been any room for the extra amount of cattle on the wait list.
“The bottom line is we’ve had seven to 10 percent more cattle than we had shackle capacity during the 2016 to 2021 time period,” Blach explains, adding an increase in the number of plants, no matter the size, will change this.
“We expect by 2022 or 2023, while the packing industry will still be profitable, producers may see margins within the markets where the packing industry actually navigates back to the producers’ segments in the marketplace,” notes Blach. “Providing additional harvest capacity could be the solution to these problems. There is not a feasible way to grow the nation’s cowherd if there is not enough capacity.”
Positivity in the market
Many cow/calf producers will say the last nice run with the cattle market was from 2012 to 2015. Since 2016, the cattle market has been marginal and has made it easy to lose hope that markets will ever return to what they were.
Blach shares producers need to be looking at the big picture, stating, “The market is sending some very strong signals. This demand signal is phenomenal, and the beef industry has actually gained eight percent of market shares through this time period.”
In the last 15 years, there has been an eight percent gain in total market share of consumer spending, at the expense of pork and poultry, according to Blach.
He believes more consumers are going to be paying for source and age verified animals, and even paying for attributes to tie back to sustainability in the industry.
“I’m really optimistic – I think it’s time for the producers to get a pay day,” he says. “Hopefully we’ll sell calves at higher prices this fall, compared to the prices we have seen the past two or three years.”
Delcy Graham is a corresponding writer for the Wyoming Livestock Roundup. Send comments on this article to email@example.com