How Many Cows Does It Take to Make 12 Million Pounds of Beef

Introduction

At showtime glance, 2022 cattle prices are college than 2021. At $140, slaughter steer prices are 17.5% above 2021 prices, just even with college prices, farmers and ranchers will travel a rocky road to profitability, paved with inflation and higher input costs in 2022. This Market Intel addresses the USDA's Cattle on Feed study released on Friday, May 20, 2022, the forces driving cattle prices higher and how aggrandizement and input costs will affect the lesser line for cattle farmers and ranchers. It will further walk through the combination of supply and demand factors that volition touch the 2022 market place outlook for livestock producers.

Supply - Inventory

The Almanac Cattle Inventory Study published by USDA estimated overall inventory on January 1, 2022, is down 2% or i,887,700 head from 2021. Cattle inventory is important with respect to the market outlook because it quantifies supply and where the manufacture lies in what is known as the cattle bicycle. The cattle wheel is the waves of expansion and wrinkle of the total number of U.S. beef cattle in consecutive years.  The cattle bicycle is a response to farmers' and ranchers' perceived profitability of the beef cattle industry over roughly a 10-year menstruum. For this Market Intel, we are going to focus on the strength behind cattle inventory, the breeding herd and calf crop.

The calf crop for 2021 came in at 35.one million head, a 1.ii% decrease from 2020. As of January ane, 2022, cow inventory totaled 30.1 meg head, down ii.3% from 2021. Heifer inventory with total heifers at xix.8 million.

The last piece of this puzzle is supply and slaughter. Commercial cattle slaughter for Apr was 2.81 million head, downwards slightly from 2021. Steer slaughter was 1.33 1000000, 4% lower than 2021. Heifer slaughter for the month of April came in at 825,200, .05% lower than this time in 2021. Moo-cow slaughter for the calendar month of March came in at 640,382, seven% higher than the same time in 2021. It's important to acknowledge the decrease in slaughter in all commercial cattle and the increase in cow and heifer slaughter. This illustrates industry position in the cattle bike. Figure 1. illustrates the electric current and by ii cattle cycles.

Based on Figure 1., the beef cattle industry is entering the contraction portion of the cattle bike. Cows and heifers brand up the convenance herd, which is responsible for supplying the calves entering the cattle inventory at whatever point during the cattle cycle.  Increased cow and heifer slaughter will upshot in a smaller dogie ingather and inventory in the upcoming months of the cattle cycle. It is natural to conclude that future inventory will be down since the calf crop, cow and heifer inventory are all declining. Yet, the southern Plains are experiencing extreme drought and it is not uncommon to remove grazing animals from forage early for placement into feedlots under these circumstances. The movement of cattle from grazing to feedlot placement or vice versa tin can throw off inventory numbers.

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Pasture and range land had a rough start in 2022, especially in the Western regions and southern Plains. Winter weather and pelting take brought some greener pastures to the upper Midwest simply USDA ingather progress reported more than fifty% of U.S. pastures are still rated poor to very poor compared to just under 50% reported in that condition last yr. This can exist compared to the five-yr average of 26.6% of pasture and rangeland rated poor to very poor. A previous Market Intel published in May 2021, demonstrated how 2021 started off with record breaking drought. While more green grass in the Midwest is likely to slow the to a higher place boilerplate moo-cow slaughter and placement of grazing animals into the feed to slaughter supply chain, much of the U.S. is still facing drought weather condition in 2022. Figure 2.  & Figure 3. illustrate the departure in the U.S. Drought Monitor between May 18, 2021, and May 17, 2022.  There has been improvement in the overall drought situation, but much of the southern Plains are still rated every bit extreme or exceptional drought.

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Cattle On Feed

USDA National Agronomical Statistics Service's Cattle on Feed (COF) program is a monthly feedlot survey conducted on feedlots with a chapters of i,000 or more caput. The April COF report estimated feedlot placements to be 1.99 million caput, slightly below 2021 levels.

The  May COF written report, released on May 20, 2022, estimates cattle on feed equally of May one, 2022 to be 12 million caput. This is up 2% from a year ago. The total number of cattle placed in feedlots is 1.81 million head, down 1% from last yr.

While the report fails to explicate how feedlot placements are fifty-fifty with last twelvemonth while inventory numbers and calf crop are down, drought may exist a office of the answer. Much of the Western United States, as well every bit the southern Plains, have experienced or are continuing to experience drought conditions. When this happens, it is not uncommon for ranchers in the Southern plains to move grazing cattle off wheat early. It is too a possibility that heifers previously listed as replacements are being placed into feedlots. Adjustments to Jan. i inventory numbers are not uncommon and may better reflect the situation as 2022 continues.

Demand

USDA Economic Enquiry Service (ERS) forecasted 2022 total carmine meat and poultry consumption at 222.7 lbs. per capita, downwards from 224.ii lbs. in 2021. The per capita scarlet meat and poultry disappearance is forecast to decrease. ERS defines per capita meat disappearance as the measure of the supply available for utilize in domestic markets including fresh and processed meats sold. When supply drops, beef prices may rise. If beef prices rising, consumer demand for beef may fall.

The spread between beefiness graded "USDA choice" and "USDA select" has narrowed in contempo days. This spread is important because it can often illustrate consumer willingness to pay for choice beef, a product that costs a premium above beefiness products graded select.  All central (wholesale cut) values have seen a decline in 2022. This tin can be interpreted as a consumer response to inflation; consumers looking to save money.

Imports

Domestic imports are an important factor in evaluating U.Southward. demand for beef. USDA ERS reports U.Due south. beef and veal imports were 353.77 million lbs. in March 2022, 29% higher than this fourth dimension in 2021.

The greatest increase in U.Due south. imports is from Brazil. Tape loftier U.South. beef prices, and drought conditions in traditional import countries such as Australia are the key motivators for this increase. Another reason the U.S. has been importing from Brazil is because China, i of the globe's largest importers of beefiness, placed an embargo on Brazilian beef imports in September of 2021. This embargo was lifted in December 2021. However, Brazilian beef continues to be directed to other markets including the U.South.

There are other factors contributing to the increment in imported beef. One of these factors is the strengthening of the U.S. dollar. When the U.Due south. dollar strengthens, it makes it cheaper for the U.S. to buy products from other countries. In improver, the decrease in consumer willingness to pay higher prices for beef makes other, less expensive, sources more highly-seasoned.

Exports

Exports fall on the other side of the supply/demand spectrum from imports. USDA forecasts beef exports to decline 1.viii% from 2021. This estimate might seem negative at first glance, merely it's of import to notation that 2022 beef and veal exports are however well above the v-year boilerplate. The strengthening U.S. dollar's impact on imports –making U.S. purchases of foreign products cheaper – has the contrary result on exports; information technology makes it more expensive for other countries to buy products from the U.Southward.

China, the world's largest importer of beef as mentioned earlier, has been implementing its COVID-zero policy which included a nationwide lockdown that has continued for vi weeks. The effects of this policy on the nutrient industry vary by region. Hong Kong, for example, dwelling to some of the world's stringent COVID-19 restrictions, has begun to ease restrictions. Overall, beef markets are watching closely and waiting for China to relax restrictions, leading to increased need for meat products.

Despite these obstacles, March trade data has indicated tape U.Due south. beef exports totaling 303.7 million pounds, 1.two% to a higher place 2021. This is the greatest quantity of beefiness exported for any month of March. Even more than impressive is record first quarter 2022 overall meat trade coming in at a whopping 845.eight million pounds, six.2% alee of 2021. China, South Korea, and Japan keep to lead the pack, being the top three destinations for U.South. beef. Red china posted a record 145.four million pounds, 61.8% above 2021.

Input Costs & The Bottom Line

One of the greatest concerns faced past cattle farmers and ranchers in 2022 is rising input costs, more than specifically feed. Iowa State University estimates total feed costs per head for finishing a 760 lb. yearling steer, in March of 2022, are $1,802.58. Feed costs account for 24% of the full cost of product for 2022 at $436.xv, up 22% from 2021. The cost of corn was estimated to increase 30.4% and hay up 45%. Non-feed costs were estimated to exist record high at $144.19 per head in March upwardly, 8% from 2021. This brings the break-even cost to $138.66 cwt, up 12.8% from 2021. These rising costs will make profitability an uphill battle.

Conclusions

The 2022 cattle outlook is a mixed purse. On 1 hand, 2022 cattle prices are higher than 2021. On the other manus, cattle farmers and ranchers face rising input expenses, and doubtfulness in the U.S. economy and the economies of key beef importers.

A strengthening U.S. dollar volition make it more expensive for other countries to buy U.S. beef while at the aforementioned time making information technology more affordable for the U.S. to import beef from other countries. Even so, first quarter beef exports were reported at record levels, primarily to the Asian markets with China leading the way.

Supply is forecast to decrease; the industry is in the contraction stage of the cattle bike while USDA has also forecasted a small decrease in consumer demand for meat. If we use history as a guide, then the cattle industry should be in the final couple years of wrinkle in inventory before beginning the expansion phase of the next cattle cycle.

Cattle farmers and ranchers are facing increases in both feed and non-feed input costs resulting in increased pause-even prices. Whether cattle prices will increment enough to offset the increase in costs and provide profitability remains in question. All these factors create a complex cattle market outlook consummate with many peaks and valleys for 2022.

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Source: https://www.fb.org/market-intel/cattle-supply-and-demand-issues-for-the-2022-marketing-year