SG_USA_October_2021

DROUGHT, FIRES, HURRICANES, COVID AND EXPENSIVE CORN AND FUEL ... WHAT'S NEXT? SANTA GERTRUDIS Product ion

By Randy L. Stanko, Ph.D., Texas A&M University-Kingsville I do not have any of the important answers, but the good news is that the U.S. Department of Agricul- ture’s (USDA) outlook has raised

consumption for next year is also projected to decrease by 2 pounds, down to 56 pounds per person. The June all- retail beef price pushed toward an annual high of $7.11 per pound. If this price level continues, in addition to increased fuel costs, we could see a greater dip in 2022 U.S. beef consumption. My major concern is what, exactly, will that 56 pounds comprise? If you do the grocery shopping for your household, you may have noticed the plethora of Prime beef cuts available for purchase. I have found this to be the case in both smaller regional grocery chains as well as the big box grocery stores. This is no doubt due to the availability of over-finished cattle due to COVID-19 slowdowns in processing plants. I believe the unknown is, what will consumers expect to see in the meat case going forward? Will there be a time in the future when consumers refuse to purchase Select beef? Alterna- tively, will the Choice-Select spread be so large that it is no longer profitable to raise and market Select-grading cattle? The Choice-Select price spread has been above the five-year average since June 2021 and was $33 per hundredweight in early September. I think all cattle breeds need to consider where we have been these last two years and critically evaluate what the future of the beef industry will become. We have all expe- rienced hardships and some challenges recently. How well are we prepared to address what might be headed our way? Uncertainties in the economy, packing plant capacities and global beef demand will affect the profit margins of beef cattle producers, including registered breeders, cow-calf pro- ducers, stocker operators and folks who are brave enough to place cattle into feedyards. Going forward, I think beef demand will remain strong and I am personally optimistic. Most agree that raising cattle will continue to be a profitable enterprise if the cattle are able to satisfy what the beef con- sumer is willing to purchase. As we look to the future and review precipitation out- looks, evaluate the current forage conditions, count the round bales, make those tough culling decisions and think about our next bull purchase, we should also consider these questions: 1) Will our cattle remain efficient and profitable? 2) Can our cattle produce beef with acceptable value in the future markets? Remember to remove those old fly tags!

the cattle price forecast by 4 percent for 2022. That is better news for beef cattle producers. The beef industry, overall, is in a “contraction phase in the cattle cycle,” according to USDA Chief Economist Seth Meyer. This contraction is partly due to ongo- ing drought in the West, aggressive

culling of mother cows, high feed prices and a weaker calf price market in early 2021, which was a result of the backlog of fat cattle in feedyards (due to COVID-19). We have seen recently that calf prices are up, and we have progressed through most of the fed cattle backlog. The USDA projects the average fed-steer price for 2021 will end up at $121.18 per hundredweight (up $2 per hundredweight vs. 2020) and for 2022, fed steers will average $126.25 per hundredweight. Some areas of concern include the National Oceanic and Atmospheric Administration’s projection of a return to a La Niña weather pattern in the fall, which translates into less tropical moisture in the Southeast and continued drought in the Intermountain West and Pacific Northwest. Projections for when we will see El Niño’s return are uncertain. Roughly, one-third of the U.S. cow herd currently resides in areas of the country experiencing some level of drought. Next year, the projected total U.S. beef production could fall to about 26.9 billion pounds. Similarly, per capita beef

Hefte Ranches, Hondo, Texas

George West, Texas (361) 566-2244 lacampanaranch.com campana@granderiver.net

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