Straight Talk: Mike Deering

Straight Talk

with Mike Deering

T-Ball Politics

Charley is now five years old. It is hard to believe I am going to have a kindergartner this year. We are trying to familiarize him with other kids he will be going to school with. We signed him up for t-ball, and I have the airhorns ready. He and his mother are convinced I am taking this too seriously and will embarrass him. Little did I know, t-ball is not what it used to be. There are essentially no real rules, and they do not keep score. It is a free-for-all likened to a fishless fishing derby at a kiddie pool where everyone gets a trophy.

As I am biting my tongue so I do not develop a reputation as the crazy parent prior to my son entering kindergarten, I cannot help but compare this to politics. Politicians seem to need everyone to feel warm and fuzzy in order to stay in office. You could say they are buying votes. Instead of focusing on true COVID-19 relief, we have a $1.9 trillion Christmas tree signed by President Biden full of trophies unrelated to the pandemic. While there is good in this package, taxpayers should not be forced to fund pet projects disguised as COVID relief. Let me be abundantly clear that this is not the first time we have seen this happen, and I have witnessed it over the years from both political parties.

Missouri Congressman Jason Smith was quoted by NPR as saying, “…less than 9% of the entire spending in this bill actually goes to crushing the virus and helping distribute vaccines and putting shots in arms.” I have not done the calculations, but a quick glance at the 628-page bill sheds light on many initiatives that have seemingly zero to do with the pandemic. The package includes millions of dollars carved out for specific universities; $270 million for endowments for arts and humanities; $200 million for the Institute of Museum and Library Services; and so much more I struggle tying to the pandemic.

On the agriculture front, the package provides $5 billion for socially disadvantaged farmers of color, including $4 billion for the forgiveness of outstanding debt and $1 billion for outreach and grants. We can debate this at a later date, but I do not believe this has one thing to do with the pandemic. I do not see how anyone could argue otherwise.

The bottom line is the relief package turned into a free-for-all with balls flying and children (politicians) laughing. The problem is we are paying for this $1.9 trillion t-ball game. In the real world of t-ball, at least kids are having fun and learning social skills. It is up to parents or guardians to fill in the blanks when it comes to winning and losing. I cannot come up with a positive when it comes to t-ball politics. They are handing out cash prizes at the expense of taxpayers and punishing the next generation of t-ball players. It is on us to demand better and elect leaders at all levels of government, regardless of political party, who are not worried about passing out trophies, but rather focused on common sense solutions to real problems.

Executive Vice President

Optimism in Beef Industry Fueled by Strong Demand with Higher Prices Anticipated

Source: NCBA

Despite pandemic disruptions, consumer demand for beef at home and around the globe remained strong in 2020, a trend that will continue in 2021 and beyond, especially as foodservice operations begin to fully reopen. The strong demand, combined with expected higher cattle prices, signal an optimistic future for the beef industry, according to CattleFax, which presented an outlook session during the virtual 2021 Cattle Industry Convention Winter Reboot on February 24.

According to CattleFax CEO Randy Blach, cattle numbers will continue to contract in 2021, and producers will gain leverage on packers and retailers and margin distribution will be more equitable. Packing capacity is expected to increase slowly with the addition of more small-scale plants, and U.S. meat exports will continue to grow. Overall, profitability is expected to improve significantly for cow/calf producers.

Lost incomes due to unemployment were replaced by government transfer benefits and household wealth increased more than $620 billion in 2020, according to Blach. In 2020, total meat sales volume at retail was up 10 percent and total dollar sales at retail up 18 percent, with beef’s share of the increase in spending accounting for 45 percent or $5.7 billion. Consumers also saved at record levels during the pandemic resulting in U.S. household net worth rising $5 trillion, which bodes well for beef demand going forward.

As beef demand reached record highs in 2020, cattle producers didn’t capture much of the margin with the bottleneck created due to plant closures as a result of COVID-19. According to Blach, the margin exists, and redistribution will lead to improving prices in the second half of 2021 and into 2022 and 2023. “The bottom line is that things are on the mend, with producers gradually recapturing margin,” he said. “A one percent shift in margin will result in $6 per hundredweight increase on fed price.”

Kevin Good, vice president of industry relations and analysis at CattleFax, reported that 1.2 million head of cattle were liquidated in 2019-2020 after a 6.3 million head expansion between 2014 and 2018. Even with fewer cattle in the system, beef production still increased. Mild liquidation is anticipated in 2021 due to drought conditions and higher feed costs, said Good, and he estimates a U.S. beef cow inventory of just under 31 million head in 2022. Good says 2021 is a tale of two halves. “There are more cattle in the system early in 2021 with big supplies on feed and heavy weights, however the second part of the year will transition to tighter calf crops and tighter slaughter,” he said. In 2021, total slaughter is expected to be up 700,000 head to 33.5 million head, average carcass weights 4 pounds lighter and beef production up 500 million pounds from 2020 to 27.6 billion pounds.

Per capita beef consumption is expected to grow slightly to 58.6 pounds per person in 2021, up from 58.5 pounds in 2020, although per capita red meat and poultry consumption is expected to decrease to 218.7 pounds per person from 221.7 pounds per person in 2020. “Over the last 20 years, beef market share increased from 40 to 48 percent, up 2 percent in 2020,” said Good. “Improvements in genetics, quality and consistency have created a better product from five or ten years ago and have helped increase demand, taking market share away from pork and poultry.”

Good forecasts the average 2021 fed steer price at $119 per hundredweight, up from $109 per hundredweight in 2020, with a range of $110-$128 per hundredweight throughout the year. All cattle classes are expected to trade higher than a year ago, and prices are expected to improve over the next three to four years. The 800-lb. steer price is expected to average $145 per hundredweight with a range of $135-$160 per hundredweight, and the 550-lb. steer price is expected to average $168 per hundredweight, with a range of $160$180 per hundredweight. Finally, Good forecasts utility cows at an average of $64 per hundredweight with a range of $52-$74 per hundredweight.

Trade continues to be a hot topic, with U.S. beef prices competitive for Asian markets. According to Good, exports in 2021 are expected to increase by 5% primarily to Asian markets like Japan, South Korea and China, with declining imports from Australia and New Zealand. Although only 120 million pounds of beef were exported to China in 2020, that market is expected to grow to more than 300 million pounds per year over the next few years.

“The U.S. is the largest beef producer on the planet, producing 75 percent of all high-quality fed beef in the world, and our product is different from competitors,” said Blach. “As the global population increases at a rate of 83 million people per year, U.S. agriculture is poised to play a key role with increasing exports.”

Mike Murphy, CattleFax vice president of research and risk management services, estimates that there will be 181 million planted acres of corn and soybeans in 2021, the largest ever combined acres for those two commodities. “That number is likely to be even higher, and in some regards it needs to be larger to balance the demand and build back supply,” said Murphy. Although corn should be able to balance supply and demand, soybeans will have a tighter supply globally, with a smaller crop expected from South America.

As China rebuilds its pork industry following their battle with African Swine Fever, they are looking for higher quality feed ingredients, such as corn and soybeans, according to Murphy. The U.S. has the supply available to provide the estimated 700 million bushels of corn that China is expected to accept.

Spot prices for soybeans are expected to be $13.50$16.50 per bushel for the remainder of 2021. “As soybean prices drive higher, soybeans will have a greater influence on the value of corn, bringing corn prices with it,” said Murphy. He noted, however, than any scares from Mother Nature this spring and summer will have concerning impacts.

All session panelists agreed that weather will be a major factor impacting the beef industry, and agriculture as a whole in 2021. Although the La Niña weather pattern has leveled off, it will be making a return with warm and dry conditions over most of the United States into the summer, according to Dr. Art Douglas, professor emeritus at Creighton University. Douglas indicated that the southwest U.S. will be warmer than normal, and the western half of the country will be relatively dry. In addition, dry conditions in the Rockies will eventually extend into the central corn belt, causing concerns for corn and soybean growers. “The Pacific jet stream is positioned far north from normal preventing moisture from reaching the continent,” said Douglas. “The only significant moisture will be in the Ohio Valley and along the Canadian border from northeast North Dakota into Minnesota.”

Blach concluded the session with an overall positive outlook, expecting beef demand to remain solid, foodservice markets improving significantly and beef and cattle prices trending higher through 2024. He also noted that plant-based protein alternatives will continue to grow market share, but gains will be slow. Blach indicated that increased consumer interest in sustainability, food safety protocols, animal care and traceability creates opportunities for producers to differentiate their products if they choose.

“Consumers are voting with their pocketbooks and buying beef,” said Blach. “The industry should take note, stay focused on quality, continue delivering what the consumer desires and tell their great story.”

Embracing the Positives in Sustainable Cattle Production

Source: NCBA

Cattlemen and women are the original climate heroes, preserving natural resources for generations, while producing safe, affordable and abundant protein for the world to enjoy. In a presentation during the 2021 Cattle Industry Convention Winter Reboot on Feb. 24, speakers discussed how cattle production contributes positively to society.

Dr. Myriah Johnson, senior director of beef sustainability research for the National Cattlemen’s Beef Association (NCBA), started the session posing a question often seen in media headlines: “How do we feed the planet in 2050?”. Johnson explained the desire that exists to feed people in a way that is sustainable for generations in the future, and how beef plays a critical role in that sustainable food system.

“The fundamental value proposition of beef to the food system is the transformation of lower value resources, such as grasses and plant byproducts, to higher value protein full of micronutrients, which nourishes people,” Johnson said.

Although people often have different definitions of sustainability, responses generally fall into three major pillars including economic viability, environmental stewardship and social responsibility. Science-based evidence demonstrates how cattle management efforts are making positive contributions to all three pillars.

Johnson provided an overview of the economic and social benefits of the beef industry including its impact on local, regional and national economies, tax contributions, job creation, rural development and food security, among others. According to a forthcoming report on the Economic Contributions of the U.S.

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Ertel Cattle Company • 660-234-5265 26694 Anchor Way • Greentop, MO 63546 www.ertelcattle.com • gertel@ertelcattle.com Beef Industry, more than 27 billion pounds of beef are produced annually, providing 144 billion, 3-ounce servings of beef. In addition, U.S. beef production and processing contributes $167 billion in gross sales and supports a labor force of more than 721,400 workers. “It matters that the beef industry exists, and research shows its impact on communities,” Johnson said.

Dr. Jason Sawyer, associate professor and research scientist with the King Ranch® Institute for Ranch Management, focused on beef’s role in the environmental pillar of sustainability. Sawyer suggested the industry focus on the term “climate neutral” which means implementing systems that have minimal effect on projected global temperature change.

According to Sawyer there is a lot of confusion about methane and its actual impact on the environment. “Methane is a natural result of ruminant digestion and can’t be eliminated without forsaking the critical capacity to upcycle human inedible feedstuffs,” he said.

There is 600 times more carbon dioxide in the

atmosphere than methane and unlike methane, which disappears from the atmosphere in 8-12 years, carbon dioxide doesn’t break down.

“Overall, the U.S. beef industry’s contribution to atmospheric methane is very small, but even annual reductions of .5 or 1.5 percent in methane emissions can help lead the industry to climate neutrality in the near future,” Sawyer said.

Although often overlooked, the beef industry has positive environmental impacts when it comes to landbased carbon removal. Carbon uptake through grazing lands can help offset non-methane emissions currently attributed to beef production according to Sawyer. If the warming potential of methane is properly accounted for, and current levels of carbon uptake are included in the greenhouse gas profile of beef systems, U.S. beef producers might already be approaching climate neutral Both speakers discussed the benefits of grazing to the social and economic pillars of sustainability in addition to environmental. “Cattle don’t just use the land, they help protect ecosystems, soil health and wildlife in addition to protecting public safety by reducing fire risk,” Johnson said. “And, if cattle weren’t grazing on federal lands, more expensive mechanical management would be required.”

Johnson summarized the session and said, “Beef is good for people, the planet and profit, and it is the complete package across all three pillars of sustainability.”

Sawyer agreed and added, “Beef sustainability is a complex subject, but there is a lot to be excited about. Production of beef is not degrading the planet, but rather improving the planet while feeding the world.”

Cattlemen Support the Death Tax Repeal Act of 2021

Source: NCBA

The Death Tax Repeal Act of 2021 was introduced this week by U.S. Senator John Thune of South Dakota and U.S. Representatives Sanford Bishop (D-GA) and Jason Smith (R-MO).

The National Cattlemen’s Beef Association (NCBA) issued the following statement in support of bipartisan legislation to repeal the federal estate tax, commonly referred to as the death tax.

“The estate tax disproportionately harms cattle producers because with few options to pay off tax liabilities, many farm and ranch families are forced to make tough choices at the time of death – and in worst case scenarios, must sell off land to meet their federal tax burden,” said NCBA President Jerry Bohn. Congress must prioritize policies that support land transfers to the next generation of farmers and ranchers. Most farm estate values can be attributed to non-liquid assets such as the fair market value of land, livestock, and equipment.

“As small business owners, environmental stewards, and the economic backbone of rural communities across the country, U.S. cattle producers understand and appreciate the role of taxes in maintaining and improving our nation. However, they also believe that the most effective tax code is an equitable one. For this reason, NCBA ardently supports the Death Tax Repeal Act of 2021,” Bohn said.

Earlier this month, NCBA sent a letter to Senator Thune, as well as Reps. Bishop and Smith in support of the bipartisan legislation.

An estimated 2,000 acres of agricultural land is paved over, fragmented, or converted to uses that compromise agriculture each day in the United States. With more than 40 percent of farmland expected to transition in the next two decades,

January Red Meat Exports Below Year-Ago Levels Amid Transportation, Labor Challenges

Source: USMEF

U.S. beef and pork exports opened 2021 below the large volumes posted a year ago, according to January data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

Beef exports totaled 105,047 metric tons (mt) in January, down 2% from a year ago, while value slipped 3% to $653 million. The decline was due mainly to lower beef variety meat shipments, as muscle cut exports were steady with January 2020 at 81,398 mt, valued at $584.4 million (down 1%) and accounted for a larger share of production than a year ago. January beef exports were very strong to South Korea and continued to gain momentum in China. Following a down year in 2020, exports also rebounded to the Middle East.

January pork exports totaled 248,656 mt, down 9% from a year ago but slightly above USMEF’s projections. Export value was down 13% to $642.8 million. Pork muscle cut exports were down 11% in volume (208,234 mt) and 15% in value ($551.3 million), while pork variety meat shipments trended modestly higher than a year ago. While pork exports to China/Hong Kong declined as expected, exports to Japan increased in January and demand was very strong in Central America, the Philippines and the Caribbean.

U.S. lamb exports climbed 7% in January to 1,027 mt but value fell 43% to $1.2 million, as volume growth was driven by lamb variety meat demand in Mexico and Canada. Lamb muscle cut exports trended higher than a year ago to Bermuda and Japan.

USMEF President and CEO Dan Halstrom said January represented a fairly solid start to 2021, but cautioned that exports still face COVID-related obstacles and significant transportation and labor challenges.

“As key destinations for U.S. red meat roll out COVID vaccination programs, the outlook for 2021 is optimistic, with retail meat demand remaining strong and the expectation that foodservice will rebound in more and more regions,” Halstrom said. “But transportation challenges are currently a dominant concern, particularly the congestion and container shortages at our West Coast ports where shorthanded crews are handling record-large cargo volumes. Labor is also at a premium in processing plants, which affects the industry’s ability to fully capitalize on demand for certain labor-intensive cuts and variety meat items.

“Although the global foodservice sector still has a long recovery ahead, international demand for U.S. red meat remains impressive and resilient,” Halstrom added. “But a range of logistical challenges must be overcome in order to fully satisfy this demand.”

A detailed summary of the January export results, including market-specific highlights, is available from the USMEF website.