Description

The beef cycle begins with the cow-calf operation, which breeds the new calves. Most ranchers breed their herds of cows in summer, thus producing a new crop of calves in spring (the gestation period is about nine months). This allows the calves to be born during the milder weather of spring and provides the calves with ample forage through the summer and early autumn. The calves are weaned from the mother after 6-8 months, and most are then moved into the "stocker" operation. The calves usually spend 6-10 months in the stocker operation, growing to near full-sized by foraging for summer grass or winter wheat. When the cattle reach 600-800 pounds, they are typically sent to a feedlot and become "feeder cattle." In the feedlot, the cattle are fed with a special food mix to encourage rapid weight gain. The mix includes grain (corn, milo, or wheat), a protein supplement (soybean, cottonseed, or linseed meal), and roughage (alfalfa, silage, prairie hay, or an agricultural by-product such as sugar beet pulp). The animal is considered "finished" when it reaches full weight and is ready for slaughter, typically at around 1,200 pounds, which produces a dressed carcass of around 745 pounds. After reaching full weight, the cattle are sold for slaughter to a meatpacking plant. Futures and options on live cattle and feeder cattle are traded at the CME Group. Both the live and feeder cattle futures contracts trade in terms of cents per pound.

Prices - CME live cattle futures prices (Barchart.com electronic symbol LE) posted their low for 2021 in January at $1.1135 a pound. Increased cattle weights pressured cattle prices briefly after the average cattle slaughter weight rose to a record 1,399 pounds in January (data from 1974). Cattle prices traded sideways to higher the first half of 2021 as the pace of U.S. Covid vaccinations increased and more restaurants reopened after being closed from the pandemic. Also, ramped up Chinese beef demand supported cattle prices as China beef shipments in Jan-Feb of 2021 were up +34% yr/yr to 400,000 metric tons. Concerns about reduced U.S. beef production in June supported cattle prices after all beef plants run by JBS SA, the second-largest beef processor in the U.S., were shut down for several days after a cyberattack. Rising meat prices in the U.S. began to crimp demand as NielsenIQ reported that fresh U.S. meat retail sales in May tumbled -12% yr/yr. However, reduced beef production in the U.S. kept cattle prices firm as beef production was slow to recover after the pandemic forced slaughterhouses to shut down. Wholesale beef prices soared to a 1-1/2 year high of $348.16 USD/cwt in August. The surge in beef prices also sent beef packer margins up to a 1-1/2 year high of $999.25 a head in August. The rally continued into year-end as cattle prices jumped to a 5-3/4 year high in December at $1.3955 a pound and finished 2021 up +23% yr/yr at $1.3890 per pound.

Supply - The number of world cattle as of January 1, 2022, rose +1.5% to 1.012 billion head. As of January 1, 2022, the number of cattle on farms in India (the world's largest herd) rose +0.4% to 306.700 million head, and on Brazilian farms (the world's second-largest herd) rose by +4.5% to 264.400 million head. As of January 1, 2022, the number of cattle and calves on U.S. farms fell by -2.0% yr/yr to 91.902 million head. The USDA reported that U.S. commercial production of beef in 2021 rose +2.7% yr/yr to 27.895 billion pounds.

Demand - The federally-inspected slaughter of cattle in the U.S., a measure of cattle consumption, rose by +3.2% yr/yr to 33.184 million head in 2021, well above the 5-decade low of 28.296 million head in 2015.

Trade - U.S. imports of live cattle in 2021 fell by -18.0% yr/yr to 1.734 million head. U.S. imports of beef in 2021 fell -by 0.8% to 3.315 billion pounds. U.S. exports of beef in 2021 jumped +17.1% yr/yr to a record 3.455 billion pounds.

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