Number of Calves Sold Per Year in Wisconsin Beef

MADISON – As the pandemic and its effects have crossed the world, consumers and producers of meat felt its effects. Brenda Boetel, University of Wisconsin-River Falls professor and chair of the Department of Agricultural Economics, outlined the outlook for meat supplies at a recent event in Madison.

As many consumers will attest, the meat supply in 2021 was down relative to what it was in 2020. But the meat supply in 2022 should be "pretty stable," she said. That will, however, contribute to retail prices for meat that are high and will continue to stay high.

In 2021 the total meat supply was down 0.8 percent and in 2022 the projection is that supply will be down 0.2 percent.

But while the supply will be stable overall, rising beef prices and pork and poultry prices that are not rising as quickly mean that consumers will likely gravitate to chicken and steer clear of higher-prices pork and beef.

The monthly retail price average for beef per pound in December 2021 was $7.35; for pork it was $4.74; and for broilers it was $2.22. Beef prices had declined and then went back up, she noted.

One metric used by the marketplace is the differential, comparing the price of beef to another meat. The beef-to-pork differential now stands at $2.61 per pound. By comparison, the average from 2018 to 2020 was a much lower $2.05. The current beef-to-broiler difference is $5.13 per pound, much higher than the average from 2018 to 2020, which was $4.01. Those numbers likely will point to consumers buying less beef and more chicken.

Retail prices have been high and they continue to stay high, she said. There was a big jump in prices in 2020, when things started to shut down due to Covid. Prices came down and since then they've been going back up. "Some prices have to do with supply and issues with some packers. What we're seeing now is that beef prices are increasing at a greater rate and that chicken prices haven't been increasing as much," she said.

Boetel spoke in person during an Agricultural Outlook Forum on the UW-Madison campus January 25. Attendance was down for the annual event, doubtless due to Covid concerns, but during the daylong event as many as 60 people were following along on sponsor Renk Agribusiness Institute's YouTube channel (including this reporter.)

To see graphs and charts used by Boetel in her presentation, go to renk.aae.wisc.edu/2022-agricultural-outlook-forum/. A link on that page also allows visitors to view a video of her presentation and those given by other speakers during the forum.

Her projections for the coming year included: lower feed prices, rising farmland values and stable production of protein (beef, pork and poultry) compared to last year. Boetel said Covid will continue to challenge slaughter capacity as sick workers and slower line speeds along with possible shutdowns will impact overall packing capacities.

While there is new packer capacity on the horizon, it can't come quickly enough to counter the impacts of coronavirus illness among slaughter plant workers.

Proposed new packing facilities and expansions won't be online until 2024 or 2025 and even those are contingent on labor, which is in short supply. A new plant in Sioux Falls, South Dakota will need 1,100 workers to operate.

The market is also affected by shortages of truckers, which impacts the flow of animals to packing plants. That shortage of trucking capacity is especially true for slaughter hogs and feeder pigs and is contributing to tighter margins for hog producers, she said.

However, fat cattle prices in the first quarter of 2022 should be up 18.2 percent over last year; for the second quarter Boetel predicts fat cattle prices 13.5 percent higher than last year. Quarter three and four should see smaller, but still positive gains at +4 percent and +1.1 percent over 2021.

Higher cattle prices

Boetel said producers of fat cattle should see significantly higher prices for their finished animals in 2022 and cattle profit margins should increase. Processors will see declining margins and cow/calf producers will gain leverage in the markets this year.

There is a herd cycle for beef, and it is now in a contraction phase, which began in 2019. Boetel said drought conditions in many regions have speeded up some of that contraction.

In 2021 beef production was up 2.7 percent and beef imports increased (+4.4 percent). The United States also increased its beef exports by 14.5 percent.

For 2022, beef production is expected to be down 2.6 percent with decreasing fed cattle slaughter, decreasing carcass weight, decreasing beef imports and decreased beef exports.

The contraction in the beef complex is evident in some numbers -- beef cow inventory on January 2021 stood at 31.2 million head. That was down 181,000 beef cows from year-earlier levels, which was 533,100 less than 2019. Boetel said the 2022 inventory is likely to be around 30.7 million head. That is down 450,000 from year-earlier numbers and down 983,000 from 2019.

Total cattle numbers are also affected by heifer slaughter, which was up 4.2 percent in 2021. Heifer placements in feedlots were 38.8 percent of total cattle on feed last year and drought conditions likely accelerated that placement as pastures were too parched to retain young heifers as future beef cows.

"The cow herd contraction is not equal across the United States," she said. In 2022 we will continue to see cow culling and the potential decrease of an additional 300,000 head in the beef cattle herd.

Contraction was also evident in the 2020 calf crop, which was 1.3 percent lower – down 456,000 head – compared to the previous year. And that number is 1.177 million fewer calves than in 2018.

The 2021 calf crop was also down – 200,000 head. That figure puts the U.S. calf crop down 1.38 million calves compared to what it was in 2018.

Feeder cattle are likely to be down 250,000 head this year and those conditions will be supportive of prices to cow/calf producers. They will also emphasize the importance of Holstein steers to the beef industry as they are a consistent product. With the continued contraction on the beef side, a larger percentage of those Holsteins will be providing beef to consumers.

Boetel commented that with dairy farmers continuing to use beef semen on dairy cows and heifers, the impact of those resulting Angus-cross animals will increase in significance at a growing rate. "That's a growing part of the beef industry," she said.

Some contractors have made agreements with large dairy farms that are using beef on dairy and those contractors are feeding those animals out and marketing them. She said its unknown to what extent those beef crossbred cattle will replace the traditional beef breed calves.

Beef cattle numbers were at their highest point in this beef cycle in 2014, she said. The industry is now at the smallest beef herd size in this most recent cycle.

Other livestock

There is also a decline in other types of protein production. Last year was the fifth consecutive year of declining turkey production, which was down 2.7 percent in 2021. But broiler production increased 0.7 percent in 2021. That marked the tenth straight year of increases.

The expectation is that there will be 1.9 percent more broiler production in 2022. If that's borne out, it will be the eleventh consecutive year of increased broiler production. Exports of chicken were up 3 percent in 2021 and are expected to be up 2 percent in 2022. Boetel said per-capita consumption of chicken in 2021 was down 0.5 pounds, but is projected to be up 2 pounds in 2022 (+2.1 percent).

In the pork complex, the nation's herd was culled significantly in 2020. Due to Covid shutdowns in packing plants, large numbers of animals were euthanized and in 2021 there were still serious impacts of that.

The size of the nation's hog herd in 2021 was down 2.2 percent from 2020.

"We have a smaller herd going into 2022 and it will be down for this year. There will be less pork for people to consume," she said.

Boetel commented that the hog industry is going to be affected by Proposition 12, which passed in California and took effect on January 1. California accounts for 13 percent of U.S. pork production. Prop 12 requires breeding pigs to have 24 square feet of pen space per pig, which is far more than most farrowing crates now provide. It also would mean that most other hog-rearing pens don't meet that requirement.

"This is a big issue for pork producers to meet this."

There are numerous lawsuits challenging the requirements and processors can still sell cold-storage pork that was harvested before January 1. But the requirement will have an impact on the pork industry, she said.

"They won't be able to sell any uncooked pork if they don't meet this requirement."

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Source: https://www.wisfarmer.com/story/news/2022/02/02/consumers-likely-switch-beef-chicken-year/9302315002/

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