From a market outlook to a look into the technology of the future, the 50th annual Beef Cattlemen’s Conference in Monett, Missouri, gave area beef producers much to consider as they move forward in 2019 and beyond.
According to Scott Brown, University of Missouri agricultural and applied economist, one of the positives for cattle producers is the continuing trend of steak as the meat of choice.
“It tells you that we’ve done something right over the last few years in the cattle markets,” Brown said. However, he did express concern over the potential for downside risk.
“The supply side for all of these livestock industries have been growing,” Brown said as he showed a graph of beef, pork and chicken production in the U.S. Despite lower prices in commodities, livestock industries continue to expand supplies.
“The sheer amount of supplies of beef, pork and chicken we’ve been growing since 2014 — it concerns me,” Brown said. “Normally, this kind of growth is what gets us in a tougher price situation.”
However, demand for beef has continued to grow, and as long as that trend continues, Brown said it should result in reasonably good prices.
“Any kind of hiccup on the demand side could back up product fairly quickly,” he cautioned, advising producers to look into options for risk management. He also recommended producers watch the domestic economy for a slowdown, which would increase market risk.
Producers should also consider the increase in Prime beef values as consumers trend for more flavorful meat and the decline in Select beef values, Brown said.
Another item to watch is feed prices.
“From a cattle perspective, corn markets look pretty good,” the economist said. “Short of a catastrophic weather event, we’ll see lower prices moving forward.”
If a severe drought were to occur, corn prices would go up, Brown predicted. However, better technology today would result in better yields than the drought of 2012.
Brown also speculated that hay prices could keep cattle herd numbers in check, adding a drought in 2019 would push hay prices more than any other feedstuff.
“We have expanded production more quickly than we’ve expanded trade,” Brown said, explaining this has resulted in consuming more meat domestically at lower prices. Brown predicted a “bearish” market environment in the late spring and summer months as feedyard demand slows. Producers have seen lower prices for calves this year, and Brown suspects feeder cattle prices will decline as well.
“Feedyards are in a much different bargaining position than they were a few years ago,” he said.
A big unknown for 2019 is how African swine fever may impact the U.S. beef market.
“ASF could have spillover effects on cattle, for sure,” Brown said. Chinese pork production could decrease by 20 to 30 percent, leading to an increase in U.S. prices and trade. “That would be helpful to us in cattle markets,” he added.
“Trade’s important to where we go forward,” Brown continued, explaining trade can impact cattle prices quickly.
If the U.S.-Mexico-Canada Agreement does not make it to the finish line, Brown expressed concern over losing the Mexican beef market.
He also explained the need for negotiating a trade with Japan.
“Japan has been a stellar market for us,” Brown said, adding that other countries are getting lower tariffs on their beef products so a fair trade deal is needed.
Overall, Brown cautioned producers to watch for downside risks and not count on upside potential as the market environment is changing.
“I’m not convinced there’s a typical cattle cycle anymore,” he said, advising producers to not continue trend lines as the weather has much to do with how prices fluctuate.
Consumers and Technology in Your Future
“We’ll have more consumers in the next 50 years than we have today,” said Justin Sexten, vice president of strategy for Performance Livestock Analytics.
With connectivity expanding and more connected devices than there are people, communication is faster than ever and fields and farms are being digitized to show how much a field should yield and to conduct head counts in feedlots, he said.
“Information is changing how we go about our life,” Sexten said as he explained we are now in a period called the “Data Revolution.”
Sexten explained the current market situation is characterized by being capital intense, volatility and low margins. Seventy-five percent of market variation is due to volatility, he added.
The use of technology could potentially reduce volatility in the future.
For the beef industry, the one source of new money is integrating what the consumers want into operations. One example, Sexten said, is the desire of companies and consumers to purchase beef raised under the Beef Quality Assurance standards.
The end users are driving change, Sexten emphasized. Wendy’s, McDonald’s and Costco have all demanded changes including reduced antibiotic use and improved animal care.
“Traceability is going to be a significant opportunity down the road,” Sexten continued.
“Traceability has genuine value,” he said as he pointed out Canada has mandatory animal identification and has led to an increase of $36 in value.
“Traceability is the low fruit,” he said. “It’s not changing production practices.”
Sexten once again emphasized considering the desires of the consumer moving forward.
“The consumer is on a spectrum,” Sexten said. “The problem is we hear a lot about the tails.” These “tails” consist of a few people who have extreme beliefs or opinions about their food while the majority of people fall somewhere in the middle.
He suggested producers make decisions based off the data they have and to try to remove bias from the decision-making process.
“Be ready to market the cattle in a proactive manner,” he said, suggesting producers avoid making reactive decisions.
He also suggested eliminating management silos and incorporating all aspects of the operation — from bankers and accountants to nutritionists — to work collectively to improve the operation.