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“ Higher cattle prices and expectations of continued higher prices may have producers interested in slowing liquidation , holding cattle numbers steady or even expanding ,” Peel said . “ However , the extent to which higher prices leads to expectations of higher profitability — and a desire to expand the herd — will be tempered by higher feed and other input costs .”
As input prices increase along with cattle prices , Peel explained in subsequent market comments that producers must adjust cattle production and marketing to maximize profits .
“ Economists model this decision mathematically resulting in the rule that profit maximization is the point at which marginal revenues equal marginal costs . This balance occurs when the value of the last unit produced equals the additional cost of producing that last unit ,” Peel explained . “ Of course , cattle producers don ’ t use mathematical models to maximize profits but should use marginal thinking to adjust to changing market conditions . Marginal decision making means that production is adjusted at the margin , i . e . with minor modifications and tweaks to production systems rather than major changes .”
Peel cautioned there are short-run and long-term considerations and risks to making adjustments .
“ Care should be taken that short term efforts to manage higher costs should not , for example , jeopardize herd health by cutting vaccination programs or skimping on nutrition and risking decreased future herd productivity ,” Peel explained . “ Markets are extremely volatile now
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Beef Demand Continues Strong So far , despite higher retail prices , consumer beef demand continues to support cattle price potential .
Wholesale beef demand will likely slow in the coming year , but cutout value should hold steady near an average of $ 280 / cwt ., Good said .
During the CattleFax Outlook Seminar Good explained global protein demand continues to rise , and U . S . beef exports are expected to grow by 5 % this year to 3.7 billion lbs ., supported in part by tightening global protein supplies .
Likewise , CattleFax sees continued domestic consumer beef demand strength this year .
Good explained inflation is also driving beef prices to a higher trading range . The USDA All-Fresh Beef Retail Price should average near $ 7.15 / lb . this year , ultimately resulting in more margin in the system .
While U . S . median household income increased last year , historically high inflation is affecting low-to-middle income Americans the most , Good says .
International consumer beef demand is extraordinary .
U . S . beef exports shattered previous volume and value records in 2021 , surpassing $ 10 billion for the first time , according to year-end data released by USDA and compiled by the U . S . Meat Export Federation ( USMEF ).
December beef exports totaled 121,429 metric tons ( mt ), up 1 % from a year earlier , while value climbed 33 % to $ 991.8 million — the third largest month on record . Volume in 2021 was up 15 % at 1.44 million mt — 7 % more than the previous record set in 2018 . Export value soared to $ 10.58 billion , up 38 % from 2020 and shattering the previous record ( 2018 ) by 27 %.
“ The beef export results are truly remarkable , especially considering the COVID-related obstacles in the global foodservice sector and all the supply-side and logistical challenges faced by the U . S . industry ,” says Dan Halstrom , USMEF President . “ Obviously , our large Asian markets accounted for much of the growth , but it really takes broad-based global demand to reach these impressive levels . So this success story is not just about Korea , Japan and China – but also a strong performance in Taiwan , excellent growth in Central and South America and a rebound in Mexico and Southeast Asia .”
Beef export value per head of fed slaughter equated to a record $ 407.22 in 2021 , up 35 % from the previous year . Exports accounted for 15 % of total beef production and 12.8 % for muscle cuts only , up significantly from the respective 2020 ratios of 13.5 % and 11.3 %.
ABOUT THE AUTHOR : Wes Ishmael has been involved with livestock publications since 1983 . Wes grew up in Colorado and has always been in and around the livestock business . He now lives in Benbrook , Texas .
44 • APRIL 2022