Bullish Cattle Market Outlook Predicted
February 2, 2022
The popular CattleFax Outlook Seminar, held as part of the 2022 Cattle Industry Convention and NCBA Trade Show in Houston, shared expert market and weather analysis today. Cattle price and profitability trends for producers are pointed in the right direction, even as challenges and uncertainty persist with continued disruptions from the pandemic. While issues around labor and packing capacity have lingered, both are expected to improve in the year ahead. These expansions in capacity combined with strong global and domestic consumer beef demand suggests increased profitability across segments, signaling a market that is healthier and more stable in the year ahead, according to CattleFax.
Kevin Good, vice president of industry relations and analysis at CattleFax, reported that U.S. beef cow inventories have fallen more than 700,000 head from last year and are off nearly 1.6 million from cycle highs. This year, the beef cowherd will near 30.1 million head.
“Drought, market volatility and processing capacity challenges affected 30 to 40 percent of the cowherd over the last year. Without an improvement in weather and profitability, at least 250,000 more head will be liquidated in 2022,” Good said.
The feeder cattle and calf supply will be 675,000 head smaller than last year, totaling 25.5 million head. Fed cattle slaughter will decline 400,000 head lower compared to last year, at 25.7 million head. Commercial beef production will contract over the next several years starting with a 2 percent decline in 2022.
Good forecasted the average 2022 fed steer price at $140/cwt, up $18/cwt from 2021, with a range of $130 to $155/cwt throughout the year. All cattle classes are expected to trade higher, and prices are expected to improve. The 800-lb steer price is expected to average $172/cwt with a range of $158 to $184/cwt, and the 550-lb steer price is expected to average $205/cwt, with a range of $180 to $230/cwt Finally, Good forecasted utility cows at an average of $75/cwt with a range of $65 to $85/cwt, and bred cows at an average of $1,850/head with a range of $1,700 to $2,000 for load lots of quality, running-age cows.
Consumer demand for beef at home and around the globe remained strong in 2021, a trend that will continue in 2022, especially as tight global protein supplies are expected to fuel U.S. export growth. This will also drive beef prices from end-users to consumers to continue higher in the coming years.
While U.S. median household income increased in 2021, historically high inflation is affecting low-to-middle income Americans the most. Inflation is also driving beef prices to a higher trading range. The USDA All-Fresh Beef Retail Price should average near $7.15/lb this year, ultimately resulting in more margin in the system.
According to Good, wholesale demand will likely slow in the coming year, but cutout value should hold steady near $280/cwt on average for 2022.
Global protein demand has continued to rise, and U.S. beef exports are expected to grow by 5 percent this year to 3.7 billion pounds. The increases were led by large, year-over-year gains into China, and Japan and South Korea remaining strong trade partners for protein. “The tightening of global protein supplies will support stronger U.S. red meat exports in 2022,” Good said.
Mike Murphy, CattleFax vice president of research and risk management services, expects summer weather patterns – and their effect on corn and soybean yields – to be the focus of market participants.
With the expectation of normal weather next spring, CattleFax is forecasting planted corn acres at 91.8 million, with a trendline yield expectation of 180 bu/acre for the 2022 planting season. Soybean acres are expected to remain near steady at 87.2 million acres for the 2022-2023 market year.
“Exceptional demand from China is leading U.S. corn exports to new records and expanded interest could easily push exports higher in 2022,” Murphy said.
Murphy noted that weather is likely to continue influencing hay prices with much of the Central Plains and the West battling some level of dryness or drought. “December 1 on-farm hay stocks were down 6 percent nationally from the previous year, at 79 million tons. Expect current year hay prices to average near $186/ton, $10 higher than 2021 prices due to tighter supplies and stronger demand,” he said.
According to Meteorologist Matt Makens, La Niña remains firmly in control of the ocean-atmosphere system, and that is unlikely to change this spring; however, it remains possible that there will be some changes throughout summer. For the U.S., barring any change to the La Niña outlook or sudden warming in the Gulf of Alaska, dryness continues across the Southwest and South with warms temperatures, too. The Northern Plains and Corn Belt are expected to have wetness farther east this spring and drier conditions for this summer, with temperatures closer to normal versus 2021.
CattleFax CEO Randy Blach concluded the session with an overall positive outlook, expecting margins to improve as cattle supply tightens and producers gain leverage back from packers and retailers, beef demand to remain solid with expected export growth, and utilization and packing capacity to improve over the next few years.
Source: National Cattlemen's Beef Association, CattleFax