The Unknowns are Present
Anyone in business will tell you it’s always the unknows that hurt the most because you cannot plan for them. If you are in the livestock business, we certainly have had our share throughout the years, and current times are no different.
You always hope the unknowns are not big, but in the past, some have been long remembered; such as an unexpected dairy buyout, an outbreak of mad cow disease, a pandemic and a winter lasting from October to May. Any of these times will make one shudder.
But remember, unknowns can be a positive, we just don’t always remember them. An open winter, a spring so wet, everyone had trouble getting branding completed, a sudden demand for lamb products during COVID-19 and a sudden rise in cow and bull prices.
While we have many unknowns coming out of Washington D.C. these days, the past year and a half shows they were not positive for agriculture. Now, with high inflation, a looming recession and high inputs and interest rates, agriculture is holding its breath.
We are hearing of higher prices for cattle in the country and feedlots in the next couple of years as cattle numbers continue to drop. Higher cattle prices and less expenses will hopefully help heal from the last few years.
The CattleFax Long Term Outlook is happy reading, and I pray it stays on course. CattleFax says there should be higher calf prices.
Even though early drought-forced placements have weakened the 2022 rally for calves and feeder values, prices will move higher through the end of the year and for the next few years to follow. Beef prices have already transitioned into a higher price range at both a wholesale and retail level.
Fed cattle have started to move into a higher price range as well, with prices on pace to be 15 to 20 percent higher through 2022, compared to 2021.
Another positive is there should be less cattle ready to be processed, so the packers will be both paying more and looking harder for more cattle to process. We hope they will not be bringing in more imports from Mexico or Canada.
Remember, both Canada and Mexico are not importing as many cattle as in earlier years. Both countries have built up their herds significantly in past years.
Exports should stay up and keep growing, but there will also be stronger imports. U.S. exports are forecasted to grow five percent and imports are looking to increase 10 percent. Export shipping rates have dropped 63 percent lately which will help exports, but remember, sea containers go both ways.
Another positive unknown is the railroad workers agreed not to strike after many months of negotiations. Most everyone thought a strike was a sure thing, but politics jumped in at the last minute. We’ll just have to wait and see what chips were thrown on the table.
We hear of a number of large packinghouses being developed in the U.S. including Wyoming, South Dakota and Nebraska, and it will only support having more cattle and feedlots in the region.
There are a lot of variables out there, but I believe the positives will win. Remember, it is election year, so politicians need to look good and some may even get off the climate change issue for a year or so.