Home News Michigan Ag News Beef Production and Profitability Impacted by Several Factors

Beef Production and Profitability Impacted by Several Factors

Photo: C.J. Miller / Michigan Ag Today.

Beef cattle producers find themselves in a challenging environment this year with several different factors impacting production and profitability.

“The bottom line is I don’t expect the cattle prices to go down and they certainly have the potential to go higher,” according to Darrell Peel, livestock market economist and professor of Agricultural Economics at Oklahoma State University. He says with higher input costs, the higher cattle prices do not guarantee profitability.  Peel adds that input costs are rising much faster than cattle prices.

“I think profitability is very much a question mark for many producers. The input cost increases in many cases are moving faster than the cattle prices have moved up at this point in time. Now, I think at some point in time, as these numbers do tighten up and sort of all of the supply fundamentals get lined up and kind of all get on the same page, then we’re going to have a little more concerted push for higher cattle prices. Not sure that happens in 2022, it should start to build as we move into 2023.”

Peel says the outlook for beef production for the third and fourth quarters of 2022 will be affected not only by the higher prices likely that will be paid for beef, but also the highest prices of production costs.

Darrell Peel, livestock market economist and Professor of Agricultural Economics at Oklahoma State University.

“Well, we’re going to continue to see the general trend we have. There’s obviously competing forces at work here, the supply fundamentals are going to get more supportive as we go through the year, that would tend to push them up. Obviously, on the other hand, we’ve got the consumer issues on the demand side, inflationary impacts that may limit beef demand more so in the future than it has thus far. So, I think we have to kind of wait and see.”

Peel adds that the demand for beef is still high.

“There’s not a lot of real loss of beef demand. I think it’s being moderated right now. For one thing, there’s no cheap protein alternative. Pork and poultry prices are high, that’s helping to support beef prices. but if you look at the beef market and some of the cuts in the seasonal patterns, it’s pretty clear that there are some impacts here that are kind of moderating beef demand.  I wouldn’t say that it’s weakened a great deal, but I think it’s sort of suspect at this point, and could turn into a bigger issue, depending on what happens really from the general economy standpoint.”

Peel says that cattle producers are being cautious right now in terms of cost management to protect potential for profitability.

Click BELOW to hear the news report from C.J. Miller on the factors impacting beef production and profitability.

Source: NAFB