“I wish I knew what cattle prices would do… I wouldn’t tell you,” Gary Brester, Ph.D., Professor Emeritus in the Departments of Agricultural Economics and Economics at Montana State University said with a laugh during the 2019 Montana Stockgrowers convention in December.
With a slide show full of graphs and trendlines, Brester discussed what seemed to be at the forefront of producer conversations – the cattle market.
“In 1975, we had a bit over a billion bovine animals in the world,” Brester said. This number increased to around 1.1 billion but Brester said it is closer to a billion now, with the United States garnering nearly one hundred million head of cattle.
Although the United States is in the top three largest exporters of beef, it is also the largest importer of beef, according to Brester. He pointed out that two major importers of beef are China and Japan which bodes well as trade deals are either completed or progressing with the two countries.
Speaking of other countries, Brester heavily discussed global competition. The U.S. has a competitive advantage, he explained, sharing the following list:
- Many areas have excellent resources…
- But they don’t have democracies;
- Lack of law and order;
- Government inefficiency is the norm;
- Corruption at every level;
- Lack of property rights;
- Lack of infrastructure (see 2 through 6);
- Lack of finance/risk management institutions (28 percent interest rates in the Ukraine); and
- Lack of participatory government.
“So global competition – they’ll look at the resources, look at how the economies function and all of those [other countries] that have really great potential can’t get this thing figured out,” Brester said.
Why can’t they figure it out? Brester provided one simple answer: power.
“The powers that own it, don’t want to give anything up,” he said.
Another hot item on Brester’s list of topics was the U.S. beef market. Brester focused on the United States-Mexico-Canada Agreement (USMCA), as well as U.S. imports and exports.
“If we look at U.S. beef production — in this case I’m adding in cattle that come from Canada and Mexico and converting it to beef — we have a view of what sort of beef production we’re getting from the entire livestock industry,” Brester said. “We can see that back in 1970, we produced about 20 billion pounds. Today, we’re around that 26, maybe a little bit more, 26 and a half billion pounds.”
Brester said there’s fewer animals in the U.S. (and the world as a whole) yet more production. The average carcass weight of U.S. cattle was around 500 pounds in 1970. Within the last 15 years, that number has increased to around 700 pounds. Currently, the average carcass weight of a single beef breeding cow is around 750 pounds.
“Better technologies, larger animals, better genetics, fewer open cows, better nutrition, better animal health, better feeding, better management – all of those things have contributed to getting more beef out of each beef breeding cow in the United States,” Brester explained.
Brester also mentioned that in “this talk, and every talk, we hear ‘the U.S. imports,’ and ‘the U.S. exports,’… nothing could be further from the truth.”
“What we’re really doing is measuring the actions in a market-based economy of thousands of firms making millions of decisions about where they’re going to buy beef; where they’re going to sell beef,” Brester said. “Then we add all that up and say, ‘it’s the U.S.’ This is the result. This is the result of all of those sorts of actions that contribute to people making decisions in a market-based economy. That’s really important because we sometimes think that there’s an entity.”
That being said, Brester noted that the U.S. currently exports more beef than we import.
After learning of market drivers, trends, and competition, every attendee in the room was anxious to hear Brester’s 2020 market outlook.
“U.S. beef production since 1990 has… expanded a little,” Brester said.
Brester said in 1990, the country was producing around 22 billion pounds of beef, whereas today, U.S. beef production ranges from 27 to 28 billion pounds. Brester called this “small, slow growth.”
However, the figures he spoke on weren’t measuring consumption, it showed the demand for beef.
“I can always get more people to consume more beef,” Brester said. “Just lower the price. The key for the industry is whether you can sell the same amount of product or more product without lowering the price? That’s what this shows.”
“We look at that 2018 as sort of a measure that’s maybe about 87 percent, saying that we’ve lost about 13 percent of the demand for beef,” Brester said. “In other words, we sell less unless we lower the price for people to buy it. So that’s not good. You want demand increase for the product and it has declined about 13 percent.”
Brester said the latest, biggest concern ranchers have is plant-based protein alternatives. He said after he saw the Burger King commercial with the “dime store cowboy,” endorsing the Impossible Whopper, he went to a grocery store and purchased Impossible Meat for himself.
Brester said he spoke with a former student who is a buyer of yellow pea protein, the key ingredient in Impossible Meat. The student said, “If we took all the yellow peas produced in North America and produced plant-based burgers, we could produce 10 million pounds of it.”
“That’s nothing,” Brester said. “That’s a rounding error in the beef sector.”
Brester said the biggest competitors of the beef industry is the pork and poultry industries. While pork has slightly declined, poultry production has more than doubled at an increase of 42 percent.
Brester answered some questions from the audience and provided his fact-based opinion. To sum it all up, Brester’s prediction for the 2020 cattle market: If trends continue, there will be no real increase within the next ten years as far as beef demand and revenue is concerned.BACK