PENDLETON, Ore. — Global demand for beef is on pace to exceed production over the next 10 years, leading to higher prices and more market opportunities for U.S. ranchers, according to an industry analyst.
Brett Stuart, president of the Denver firm Global AgriTrends, gave his forecast Nov. 23 at the Oregon Cattlemen's Association convention in Pendleton.
With a growing world population and expanding middle class, Stuart predicted beef demand will increase by 12 million tons over the next decade. Yet production is only expected to increase by 4 million tons, leaving a shortfall of 8 million tons.
"This is a fantastic time to be in your business," Stuart told the convention of ranchers. "We need more beef production globally."
Beef exports are already rising through the roof, Stuart said, with the U.S. on track to export $10 billion worth of beef this year.
Exports to China in particular are up 693%, which Stuart credited in part to the Phase One trade agreement reached under the Trump administration. "These trade agreements, you can't underestimate how important they are," he said.
The appetite for beef in China is similarly massive, with consumers paying $6.05 per pound, Stuart said.
"They are going absolutely crazy for high-quality, grilled beef," he said. "The Chinese market is incredible."
Brazil is still the world's top beef exporter, though Stuart said the Phase One China deal has allowed the U.S. to start narrowing the gap.
Meanwhile, Brazil has experienced problems. Chinese demand is so hot that Brazilian producers have been aggressively slaughtering both steers and heifers, which Stuart said has caused a contraction in supply.
It also took the Brazilian government 80 days to report an outbreak of bovine spongiform encephalopathy, or mad cow disease, that has caused unease among consumers.
Supplies are also tightening elsewhere in the world. Production and exports in Australia are down 20%, and production in Argentina is at a two-year low. Canada is down 44,000 head of beef cattle in two years.
The U.S. beef herd was down 2% as of July as well. The good news, Stuart said, is that as supply decreases, prices will increase, shifting some leverage between ranchers and packers. Futures markets show calf prices rising to $138 by Feb. 21, 2022, and $141 by April 22.
But it's not all good news, Stuart cautioned. Higher prices will still not be able to keep up with pandemic-induced inflation.
The price of beef is up 34% since Aug. 1, but inflation has caused gas and diesel prices to increase 56% and 54%, respectively.
Fertilizer prices are up 110%, natural gas is up 166% and steel is up 281%.
"You're not keeping pace with inflation," Stuart said. "I know it's not your choice, but as of right now, it's a tough proposition."
The beef industry faces other challenges, including food activism and legislation that limits consumer choice, Stuart said. Climate talks have also centered on reducing methane emissions, which has placed livestock producers in the crosshairs.
Still, the outlook appears to be positive with global forces driving more beef production, Stuart said.
"We're not in a dying industry. We're in a fantastic industry," he said. "The market is saying we need more beef, and we need a lot more beef."