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Cattle markets back on track in 2021

TAGS: Outlook
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2021 Southwest Economic Outlook: Southwest economists and specialists weigh in on the 2021 economic outlook.

outlook-logo-21-perry.jpgThough pandemic impacts continue today, cattle and beef markets are showing signs of stabilizing after the unprecedented disruptions and dynamics of 2020. At the end of 2020, total beef production for the year was close to pre-pandemic expectations despite the short-term volatility during the year. Total 2020 beef production was projected to be just slightly higher than 2019 levels and reflected a cyclical peak in beef production. 

Beef demand was rocked in 2020 by the severe disruptions in food service that persisted through the end of the year. Despite massive economic shocks that impacted all of agriculture as well as the broader U.S. and global economy, beef demand remained remarkably strong in 2020. Beef exports decreased in 2020 because of disruptions in beef production and the global recession that affected export destinations.  Major markets for U.S. beef were Japan, South Korea, Mexico, Hong Kong and Taiwan. The biggest impact on exports was the severe economic recession that sharply reduced beef exports to Mexico. Though still small, beef exports to China grew sharply in 2020. Beef imports increased in 2020, in part the result of strong ground beef demand. 

Uncertainty is expected to persist as 2021 begins but conditions may improve and stabilize in the second half of the year. The availability of a COVID-19 vaccine is expected to bring the public health crisis under control in the coming months. The U.S. and global economies begin the year fragile and face many challenges but with significantly improved prospects as the year progresses.  With cautious optimism, cattle prices are expected to average modestly higher in 2021. 

Cattle inventories will likely be modestly smaller in 2021 due to limited herd liquidation in 2020. Feeder cattle supplies will be smaller, leading to reduced feedlot production. However, carryover drought conditions could provoke additional herd liquidation in 2021. Beef production is forecast to decline in 2021 with cyclically smaller cattle slaughter and carcass weights pulling back from record 2020 levels.    

Beef demand, though strong through the end of 2020, remains precarious going into 2021. The ongoing economic recession, including elevated unemployment and reduced consumer incomes is a threat to beef demand. These threats may stabilize and diminish as 2021 progresses. Beef demand will continue to be challenged by larger supplies of pork and poultry.   

The beef trade picture is expected to improve in 2021 with beef exports increasing modestly and beef imports decreasing year over year. Though uncertainty persists, especially early in the year, there is a general expectation of improving global economic conditions. U.S. exports are also being supported by a weaker dollar. 

Persistent drought conditions reduced forage supplies in 2020 and may carry over into 2021.  Additionally, late-season reductions in 2020 corn crop production estimates, combined with strong exports, significantly tightened feedgrain supplies for 2021. Higher feedlot ration costs are a cap on feeder cattle prices and another factor to monitor this year.   

There is considerable promise for 2021, albeit with lots of uncertainty. Cattle producers will likely see some improvement in profit potential compared to 2020. However, risks remain elevated and producers need to defensively protect their financial situation while looking for emerging opportunities in a post-pandemic world.  

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2021 Outlook articles:

Source: is Oklahoma State University and Texas A&M University, which is solely responsible for the information provided and is wholly owned by the source. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset.

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