Cattle producers have had a tough time over the last couple of years, but better times are ahead, according to one industry analyst.
The COVID-19 pandemic backed up nearly a million head of fed cattle last spring, Randy Blach, CEO of CattleFax, told the National Cattlemen’s Beef Association Winter Reboot conference last week.
“We’ve pretty much got the slaughter back on pace in here, but we’re still putting record tonnage through these systems,” he said.
That record tonnage is still testing the market, and markets are still underperforming. But fed prices have recovered from the $95 per hundredweight last summer to about $114 now, he said.
“So the markets have had a nice recovery, but there’s still significant potential above where we’re sitting today,” he said.
Drought has continued, and the herd is continuing to contract. But cattle prices are still not where producers want them to be, he said.
With record packer and retail margins, cattle producers have been frustrated. But there’s also been record beef production since mid-June 2020, he said.
“This has been what’s holding us back to some degree,” he said.
Weather impacts in the last couple of weeks are going to shave some tonnage off markets, but there’s still plenty of cattle to harvest, he said.
“But there are better times to come,” he said.
Beef demand in 2020 was the strongest in over 30 years, and it’s going to be another strong year in 2021. The growth in beef demand has added more than $250 a head to the value of fed cattle over the last several years, he said.
“So this has been pretty phenomenal,” he said.
Retail meat sales were up 10% in volume in 2020, even though foodservice sales were hammered. Retail meat sales were up 18% in value, an increase of nearly $13 billion. Beef’s share of that increase was almost $6 billion, he said.
“People voted with their pocketbooks. I think we’ve got to like what we see transpire here,” he said.
Despite higher unemployment, U.S. household wealth increased more than $620 billion in 2020 due to government support, he said.
“As this economy opens back up again, people are going to want to get out and spend money,” he said.
He expects U.S. gross domestic product growth will be somewhere near 6% in 2021. Some of that will depend on how fast populations in the U.S. and other parts of the world are vaccinated. But he’s expecting two years of strong GDP growth post-COVID.
When the economy opens back up, job markets will improve and people are going to want to spend money, he said.
“The consumer balance sheet is in the strongest position it’s been since the early 2000s,” he said.
Government data would suggest U.S. household net worth has increased $5 trillion.
“That bodes well for demand going forward,” he said.
In the bigger picture, agricultural loan repayments are up, debt is down, land values have increased and global demand is strong, he said.
“This should be a nice run for the agriculture industries here over the next three to four years,” he said.