By Clint Thompson
Beef production is expected to grow at a slower rate, while demand should improve with the recent trade agreements being finalized, according to Amanda Smith, a public service associate in the University of Georgia Department of Agricultural and Applied Economics.
Smith talked about the current state of the beef cattle market and the impact it’ll have on cattle producers during the 2020 season during the Beef Cattle Short Course in Irwinville, Georgia on March 3.
“We’re starting to see beef production grow at a slower rate. Earlier in this cattle cycle, we saw an average growth rate of 4% per year. Now, growth is projected to be 1% per year. We’re starting to see growth slow down. That’s going to affect supply,” Smith said. “As far as demand, we’re looking at some pretty good indicators. Per capita consumption of beef has improved, and exports should increase as a result of the US-Japan trade agreement and the US-Mexico-Canada trade agreement. Hopefully, the phase one agreement with China will also result in more beef exports once it gets put into play after they deal with the coronavirus outbreak that has put their economy on hold.”
Unfortunately, no one knows how long the coronavirus crisis will last.
“Their priority right now is not to worry about how much agricultural products to buy from the U.S. Their priority is trying to contain this virus and prevent its spread. Now we’re seeing it in other parts of the world and other economies are having to put things on hold as well,” Smith said. “We saw it here domestically. The stock market dropped dramatically last week.”
If China fulfills its part of the phase one deal and increases its purchases of American agricultural products, cattle producers could see a price increase. Smith said prices right now for choice steers and feeder calves are expected to be close to last year or a little bit improved, but not as high as 2014.
“They’re not the highest prices we’ve seen, and we probably won’t see prices like we saw in 2014 again unless there’s a significant disruption to supply like a devastating drought or rapid liquidation of the US cowherd,” Smith said. “If we start to see the percentage of retained heifers go down and there’s a significant reduction in cow-calf numbers, that signals accelerated liquidation and then we may see the price of beef go up. Accelerated liquidation may occur because of widespread drought or ranchers getting out of the business after years of decreasing net farm incomes. That is probably not likely to happen (though).”