Weather, Cattle and Markets – What to Expect

Written by: Lacie Dotterweich   |   October 16, 2020

Trade, Economies, Member value, Brazil

This week, the American Feed Industry Association held its Digital Dialogues webinar series, highlighting what we can expect for the weather, cattle and global markets.

The weather discussion was no small talk. Art Douglas, Ph.D., of Creighton University, said that for the first time in eight years, we are experiencing a major La Nina event, which is creating a drought over large swaths of the United States. The La Nina will also cause drought issues with this year’s South American summer crops and the winter wheat in the U.S. plains.

The prediction is that winter cattle feeding in the U.S. will benefit from a warmer and drier weather pattern this winter.  Douglas also provided an outlook for this winter’s outlook in terms of temperature and precipitation – overall, he expects it to be a mild and dry winter, until February where it may get colder and wetter, but the drought will continue until the spring of 2021 when it will shift away from a La Nina to El Nino event by early summer.

The dryness experienced across the West, Plains region and Corn Belt from the La Nina also influences cattle numbers. According to Kevin Good of CattleFax, who also spoke at the dialogues, the herd expansion formula goes by “grass + cash = calves,” and since there is less grass, there will be less calves. “Mother nature has to provide the feed resources for the producer to expand,” he said.

As for the global beef markets, Thursday’s speaker, Don Close of Rabo Agrifinance, said he believes this has been the most dynamic year full of ground-shifting changes in the global meat trade.

“This is the greatest economic downturn in the economy since the Great Depression,” he said. It will take a while to recover, he continued. Even with the introduction of a vaccine and the risk of COVID-19 being removed, it will likely take eight full quarters before the country will see restaurant business restored to where it was before the pandemic, he said. However, he continued that the U.S. has actually made it through the current recession pretty well compared to other countries around the globe.

Mexico has been hit incredibly hard from COVID-19, not so much from the illness, but rather from the slowdown of the U.S. economy. “They are in the middle of a really tough economic downturn,” Close said. And on the other side of the U.S., Canada is increasingly becoming dependent on U.S. feeder cattle to keep fences full, once again becoming a residual supplier or background/overflow situation for America. Close believes this will likely continue to be the case into the next year. Brazil is another country that has had a “tough go” with COVID-19, losing a lot of productivity and reducing domestic beef consumption by 10%.

A big game changer happening in global protein trade are the developments in Europe, he said. Close believes Brexit is going to come as a hard-stop instead of a soft-stop and is unsure of where that will leave Great Britain and its need for security and economic alliances. These developments could be a good chance for a partnership between the U.S. and Great Britain.

Brazil has long been a competitor to U.S. beef, but despite Brazil representing 20% of global beef exports, the U.S. is still well-positioned. Hands down, the U.S. is the most efficient beef producer in the world, he said, holding 20% of production but only 10% of cattle population worldwide.

Efficiency and sustainability are topics that will not be going away anytime soon. “The hot topic of 2021 will be more and more public discussion on sustainability,” Close said. “Many consumer-facing companies are adopting sustainability protocols – Walmart, Costco, Tesco, etc.” He also believes that U.S. producers are more receptive to sustainability discussions now than they were originally.

We hope attendees got a lot out of our first Digital Dialogues series and now have a better understanding of what to expect in the coming year.