STILLWATER, Okla. — The consumer, the weather and how fast the world, particularly the United States, can get control of the COVID-19 pandemic and start to recover hold keys to how well the U.S. beef industry fares in 2021, according to one industry economist.
“As much as we’d like it to be a past issue, it’s not yet a past issue, so we’re still dealing with it,” said Dr. Derrell Peel, Oklahoma State University Extension livestock marketing specialist.
While the U.S. meat sector as a whole took a hit from the loss of business in the food-service sector in 2020, the U.S. beef industry came out of 2020 better than might have been expected.
“The good thing is that, to a large extent, cattle and beef markets ended 2020 on a fairly positive note. We did see some price recovery late in the year. Feeder cattle markets, particularly the lightweight calf markets, finished 2020 pretty strong,” said Peel, who presented his outlook for the U.S. beef industry during the 2021 American Farm Bureau Federation Virtual Convention.
The retail grocery market, with shoppers rushing to stores as pandemic shutdowns and quarantines set in across the United States, helped make up part of the loss of the food-service sector. Along with that, government payments in 2020 helped boost and support consumer grocery purchases.
“One of the reasons we did not see more impact on demand in 2020 was because we had significant amounts of stimulus, federal support for consumers to maintain spending and to get through the situations they were dealing with and we are going to see a little bit more of that, certainly in the first part of 2021, so that’s probably a key going forward,” Peel said.
But the challenges with the continuing loss of much of the food-service sector will continue to drag on the industry.
“We do have vaccine implementation and so we can sort of see a path to an end of this thing, but that’s going to take a few months. Certainly I think the first half of the year is going to be a continuation of what we were dealing with in 2020 from the standpoint of the pandemic,” Peel said.
Retail demand will continue to be the major demand driver.
“Obviously, consumer incomes become a key. Consumers have to have money to spend,” Peel said.
The weather, particularly ongoing and worsening drought in many areas of the country, could impact feed prices and supplies, particularly going into the second half of the year.
“We have very widespread drought in the western part of the country. It’s wintertime and so the drought issues are not necessarily having a huge immediate impact. If this persists and we start into a warm grazing season and crop production season with these kinds of drought conditions, we are going to see significant impacts so that’s already there,” Peel said.
Ongoing herd liquidation is another factor that is setting the industry up to see some profitability in 2021.
“Cattle numbers peaked in 2019, January of 2019, from the standpoint of the beef cow herd. We had some liquidation coming into 2020, we saw that beef cow herd down a little over 1%,” Peel said.
Where’s The Beef?
The Jan. 29 U.S. Department of Agriculture cattle report showed the U.S. beef cow herd at 31.2 million head as of Jan. 1, down 1% from a year ago, and the all cows and heifers that have calved at 40.6 million head, down slightly from 40.7 million head a year ago.
“I think the supply side is generally supportive of the idea of some modest strength in prices going forward. I don’t see supply being an extra burden, at least in the beef industry in general,” Peel said.
The backlogs in animals due to processing plant closures and slowdowns that dogged the industry and markets in 2020 seem to have been worked through, according to Peel. Carcass weights have trended higher over time but 2020 saw a marked increase in carcass weights due to processing plant problems.
“Relative to the increasing carcass weights we had in 2020 that were caused by the delays in marketing cattle in a timely fashion during the year, we’ll probably see the average carcass weights in 2021 pull back a little bit from those levels,” Peel said.
On the export side, China continues to have an appetite for imported beef, which could benefit the U.S. industry, but one major market, Mexico, continues to struggle.
“We did see beef exports drop a little bit in 2020. China is not one of our major markets right now, but we have continued to see significant growth from a U.S. perspective. One of the biggest markets for us that was severely impacted negatively in 2020 was Mexico, so the question of recovery there would be an important one as we think about 2021,” Peel said.
With demand staying steady and hopefully increasing as the United States claws back from the COVID-19 pandemic and with supplies of both cattle and beef moderating, Peel said his expectation is for “moderately stronger prices” across the cattle markets this year.
“I would put them in the range of probably 5% to 8% or 9%. I think there’s a chance we could do a little better than that, particularly in the second half of the year,” Peel said.