SPRINGFIELD, Ill. — Almost 200 beef producers attending the Illinois Beef Association annual meeting heard pretty positive news about market opportunities for next year.
The futures market has been rallying hard for the last 18 months and probably has another year to 18 months of uptrend ahead, barring unexpected events like COVID, John David Hales said in his outlook at the annual meeting at the Illinois State Fairgrounds in Springfield, Illinois.
The cattle industry is getting to the point where heifer retention will build.
“That’s the real reducer to slaughter,” said Hales, of Amarillo, Texas, who has published a weekly cattle market letter since the 1970s.
Heifer slaughter will fall below levels of the last two years before this fall, he predicted. If the hay season is good, he expects heifer retention to continue to rise.
Hales expects the high in the market to be in late 2024 or early 2025.
A new player in the market is the Suspended Fresh process, developed by Tyson, which he said will likely moderate seasonal prices. This process allows meat to be taken down to low temperatures near freezing for 30 to 90 days. When it is removed from “suspension,” retailers have another 30 days to market it as never-frozen, fresh beef, Hales said.
It will affect the timing of when retailers buy meat for high demand like Father’s Day and July 4. They will be able to buy in the winter when beef isn’t moving as well as in grilling season, Hales said.
In answer to a question from a beef producer, Hales said he doesn’t think the new tool is either good or bad. However, It could reduce some volatility, which is probably beneficial, he said.
“It tends to flatten the market, take the highs and lows off,” Hales said. “It takes out the seasonality.”
The current high prices for beef can scare some customers away, Hales said. Costco stores dropped from buying Prime to Choice to avoid losing customers who back away from high prices, he said.
There is some fear prices could be too high, he said, referring to the expression “the best cure for high prices is high prices.”
New processing plants may be coming online at a challenging time.
“It could be a terrible time to own a new packing plant,” Hales said.
He would not be surprised to see some packers go out of business, probably the newer ones, or more established packers could buy them to take advantage of the new technology and systems.
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On the international scene, farmers heard export opportunities are out there with some headwinds to overcome. The challenges include Proposition 12 in California. There is uncertainty about how much the new law, regarding animal confinement, will impact the industry across the nation when it takes effect July 2, said U.S. Meat Export Federation communications director John Herath.
Since meat must travel through California to get to Pacific ports, the USMEF is watching to see if there is any disruption.
Other factors which may slow exports include inflation, the strong U.S. dollar in recent months, and potential strikes at western ports.
The reduced supply of U.S. beef is also a factor in export levels. However, the push for strong export demand remains because beef supply is cyclical and the markets have to be there when supply increases, Herath said.
And markets must be available for the whole carcass, he said.
In volume, the biggest buyers of U.S. beef are Japan, South Korea and China.
“South Korea hit an all-time record of $2.7 million,” he said.
Japan’s volume was down by 4%, with that country being slower returning to eating out and pre-COVID beef consumption than other countries. Japan is also experiencing higher inflation, he said. But Japan remains a strong customer and will be back once they sort out price pressures, Herath said
On the opportunity side, global tourism is rebounding, there’s an expanding middle class around the world, growing demand for protein, and “we expect that inflation will even out,” he said.
While exports to China are important, the U.S. relationship with China can be “fickle,” Herath said.
Vietnam, Singapore and the Philippines are among the countries the council will focus on next year, he said. South and Central America offer many opportunities, he said. Demand has grown in Colombia with USMEF and collaborators providing education at butcher shops.
African demand is also growing in areas with a fast-growing middle class.
“COVID changed the way we do things,” he said.
In South Korea, 50% of all retail is online. The pandemic changed how food is delivered around the world, and more places are getting access to U.S. meat.
“Mexico has been a star for buying so far this year,” Herath said.
It is important for Mexico and the U.S. to resolve their disputes about GMO corn since the market there is “growing like gangbusters,” he said.