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Marketing economist looks for higher cattle prices in 2022

Tim Petry

Tim Petry

Tim Petry, NDSU Extension livestock marketing economist, says the last couple years have been pretty tough in the cattle business, but things are looking up for 2022 and beyond.

“In 2020, the pandemic caused pandemonium in the markets, and this year, while the markets have rebounded, for those of us up here in North Dakota, South Dakota, and Montana, the drought has been the big, looming topic,” he said.

Drought conditions throughout the region in 2021 caused a plethora of management issues for cattle producers, leading to some forced liquidation of cows.

“We’re short on forage and pasture conditions, so that’s been tough for producers,” Petry said. “We’re going to need some rain next year for sure.”

It’s not just the Dakotas and Montana that had to deal with dry conditions in 2021, but the whole western part of the United States, which, according to Petry, has resulted in 36 percent of the national beef cow herd being in an area of drought.

“We decreased the beef cow herd in 2019 and 2020, and due to the drought this year, it’s going to go down for the third straight year, so what that means is that better prices are ahead.”

When it comes to calf prices, Petry explained that the two biggest market-affecters are fed cattle and corn prices.

“2021 corn prices increased quite a bit – double the previous year at times. When you change corn 10 cents a bushel, you change fall calf prices $1 in the opposite direction,” he explained. “Fed cattle prices are $25 above what they were in 2020, up to $130. So fed cattle are up, demand is strong for beef both domestically and with exports, unemployment is coming down, restaurants are opening up, so that’s all helping.”

Petry described U.S. export demand as “booming,” citing record beef exports in 2021 and into 2022.

“That’s bolstered particularly by China, who moved up to our third best customer,” he said. “Japan and South Korea have always been our really good customers, as well.”

Trade negotiations with Japan, South Korea, Canada and Mexico negatively impacted U.S. exports in 2019, but after trade agreements were made with all four countries in 2020, export numbers have rebounded since.

“That got us going back strong to Japan and South Korea, as well as Mexico and Canada,” Petry said. “We were also able to sign Phase One of the agreement with China in January 2020, and since then, actually, I would not have expected the export market to China to be as good as it has been. China took no beef from us in 2019 and prior, and now, just through the last year and a half, they’re our third-best customer.”

As for the supply side of the equation, the cow herd has been reduced, and Petry estimates it may even continue to go down in 2022, which is supportive to prices.

“We look for higher cattle prices for the next several years, but they will for sure be higher next year in 2022, likely in 2023. A lot can happen, but probably beyond that, as well,” he said. “We certainly need rain in the spring, but the stars are aligning for better times. Smaller calf crops, smaller numbers to feed – it’s all supportive to prices."

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