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The Four C’s: Cattle Inventory, China, Coronavirus, Cold Storage
DR. ANDREW P. GRIFFITH
KNOXVILLE, TENN.
This article touches on several different topics, all of which are influencing cattle markets and a couple that are reaching most commodity markets and the broader economy. This shotgun approach of providing information may seem inefficient or unnecessary to some, but these are some of the things influencing cattle markets.
The January 1 Cattle Inventory report is always a highly sought piece of information. This report provides very detailed information on beef and dairy cow inventory as it relates to the breeding herd, calf crop, and point of production for certain weight classes. All cattle and calves as of January 1, 2020 totaled 94.41 million head which is a decline of 0.4 percent from the previous year. Tennessee cattle inventory totaled 1.81 million head which was an increase of 0.6 percent from the previous year. Beef cows that calved totaled 31.32 million head representing a 1.2 percent decline from last year while Tennessee beef cows that calved decreased 0.5 percent and totaled 909,000 head. The calf crop in 2019 totaled 36.1 million head which is a decrease of 0.7 percent from 2018. There is more information to be gleaned from this report, but most of the information should support cattle prices in 2020 and moving into 2021.
There is no shortage of discussion on China. The topics include opening trade avenues to China, African Swine Fever, growing middle class demanding beef, coronavirus, and many more. Despite all of these talks, the only thing for certain is that leaders in China are working just as hard as the leaders in the United States to gain the upper hand in this tug-of-war between the world’s two largest economies. It would appear that the signing of the Phase One deal with China is positive for agriculture and specifically beef since many of the barriers to trade have been relaxed such as removing the age restriction for beef, recognizing the current traceability system, and adopting internationally accepted maximum residue levels for three common veterinary drugs generally found in implants. However, there is no reason to be counting chickens, money in this case, until the eggs have hatched.
African Swine Fever has absolutely devastated the Chinese pork industry which means China has been and will continue to import meat protein in the near term. Some of this will come in the form of importing more pork, but the growing middle class in China is developing a taste for beef. Much of the beef moving into China is from Australia, but there may be an opportunity to slip some high-quality U.S. beef into the trade channels.
The outbreak of coronavirus in China has many people worrying about something that does not necessarily deserve the attention. It is good to be aware of virus outbreaks and ways of protecting oneself, but there is no reason to devote a lot of time to worry. The Chinese government is most likely not sharing the true overall impact of the virus in their country which is fairly typical of how the Chinese government operates. The point in saying that is that it is probably much worse than the Chinese government is saying. However, it is not a worldwide pandemic at this point. Thus, there is no reason to believe that this outbreak will greatly influence beef movement and beef prices. That is not to say that it will not at some point.
Beef in cold storage at the end of 2019 totaled 481 million pounds which is the lowest quantity to end a year since 2014 when prices were at record levels. This is one indicator that beef movement remains strong and that supply is manageable.
Overall, most of this information is positive towards the cattle and beef industry. Prices should be supported moving through 2020 with a noticeable difference in the second half of the year compared to the previous year. It is important to be aware of what all is happening in the world so one can better understand why markets react as they do. ∆
DR. ANDREW P. GRIFFITH: Assistant Professor, Department of Agricultural and Resource Economics, University of Tennessee
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