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Strong livestock prices should hold in 2022, economist says

Strong livestock prices should hold in 2022, economist says

Livestock outlook composite 5 photos

Demand continues to drive higher hog prices, and Oklahoma State University Extension economist Derrell Peel says feeder cattle prices should grow stronger.

Livestock prices will finish strong in 2021 and should maintain that momentum well into 2022.

Lee Schulz, Extension livestock marketing economist at Iowa State University, says good prices usually result in expansion of the hog herd. However, that subject is up for debate.

“I think we are equally likely to see expansion or contraction,” he says. “Right now, there is a lot of incentive to expand.”

Schulz says prices in 2021 are the highest since 2014. He says prices are likely to go lower in 2022, but should remain “historically strong.”

The big concern, he adds, are production costs.

“Costs were 30% higher in 2021 than in 2020,” Schulz says. “We expect those to hold in 2022, and we’re not just talking about feed costs. We’re talking labor, energy, services, machinery, etc. Those inflationary costs are here to stay.”

He says demand continues to drive higher hog prices, adding that demand will need to be maintained for prices to continue seeing strength in 2022.

For the first quarter of 2022, Schulz sees lean hog prices averaging between $81 and $84 per hundredweight, with second quarter prices in the $88 to $92 range.

In the third quarter, he is forecasting a price average between $85 and $90, with fourth quarter numbers between $74 and $80.

“We’re looking at a yearly average in that $84 range,” Schulz says.

He says other factors will figure into prices, including the spread of African swine fever, the domestic and global economies, and grain prices.

It took a while for cattle prices to strengthen as the market continued to work itself through 2020 and the COVID-19 pandemic, says Derrell Peel, Extension livestock marketing economist with Oklahoma State University.

“We’re seeing higher prices across the board for cattle,” he say. “Retail prices went higher as well. Right now, there is a lot of margin between market and retail prices, but I believe that will get re-aligned in 2022.”

Peel says feeder cattle prices should grow stronger.

“I think we’ll see those prices go up 5 to 10%, although we will continue to see some seasonal volatility,” he says.

Peel says feed costs will impact margins, although he does not believe corn prices will spike after a decent harvest.

“I think those costs are already baked into the market,” he says. “If you look at the futures market, there is an opportunity for feedlots to lock in some pretty good prices.”

Peel suggests feedlots and cow-calf producers keep an eye on input costs. He says hay prices have been high.

“We are probably where we are going to be when it comes to feed costs. I don’t see those coming down dramatically,” he says. “Just keep an eye on them and be ready to lock in some numbers if you can.”

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