Beef prices are expected to jump in the coming months as domestic supplies continue to shrink, according to a recent U.S. Department of Agriculture (USDA) report.
This year, total red meat and poultry production is forecast to fall for the first time in close to a decade, the USDA reported in its biannual outlook on dairy, livestock, and poultry.
USDA researchers say the downward projection is the result of a 6 percent decline in beef output that “more than offsets forecast increases in pork (2 percent), broiler meat (1 percent), and turkey (7 percent) production.”
Because of the shrinking production of cattle, there’s expected to be a year-over-year decline in beef output, the first since 2015.
Earlier this year, the U.S. beef cow herd plummeted to its lowest level since 1962, the USDA reported in its biannual cattle report (pdf). Last year, a severe drought raised livestock feed costs and forced ranchers to send cows to slaughter rather than keeping them for reproduction.
The February producer price index (PPI) found that complete beef cattle feed, supplements, concentrates, and premixes rose by nearly 11 percent from the same time a year ago. This PPI component hit a year-over-year percentage peak of 26.4 percent in August 2022.
“While 2019 was the second-wettest year on record for the continental United States, after 1973, dry conditions began to persist in 2020, mostly in the West and Plains farm production regions,” the USDA stated. “Overall, drought has contributed to reduced pasture and range conditions and increased beef and cow slaughter. Any changes to the current drought conditions will likely impact inventory numbers in the coming year.”
Veterinarian Tera Barnhardt checks on a cattle pen at Cattle Empire feedyard in Satanta, Kansas, in this undated handout picture. Tera Barnhardt/Handout via Reuters
Today, there are fewer than 29 million beef cows, down by nearly 4 percent from last year, the smallest herd size for this time of year in 61 years. The number of cattle and calves nationwide tumbled by 3 percent to 89.3 million.
The latest figures confirm that the U.S. beef market is tight, according to University of Missouri livestock economist Scott Brown.
“It just continues to tell us we’re going to get tighter in terms of slaughter-ready numbers in the second half of 2023,” Brown told CME Group’s Brownfield Ag News.
According to a recent report from Rabobank, a Dutch-based multinational banking and financial services company, the herd won’t be rebuilt until 2025 at the earliest, which will weigh on prices.
“Much like the start of previous cattle cycles, competition for U.S. beef among restaurants, retailers, and export partners will increase; battles for market share among existing processors will intensify; and feedyards will struggle with capacity utilization. That much seems certain,” Rabobank senior analyst Lance Zimmerman wrote in a research note.
“These changes could alter the trajectory of prices and production in the next cattle cycle.”
It isn’t only the United States experiencing beef supply troubles.
Brazil, the world’s largest beef exporter, suspended beef exports to China after discovering a case of mad cow disease. The Ministry of Agriculture confirmed an instance of the animal illness—bovine spongiform encephalopathy—prompting the government to halt shipments to Beijing. China accounts for approximately 60 percent of Brazil’s exports, ahead of Argentina and Uruguay.
In Ireland, finished cattle stocks destined for beef factories dropped by more than 6,000 head in the first 10 weeks of 2023, according to new data from the Department of Agriculture, Food and the Marine.
Farmers in New Zealand could slow output in response to inflationary pressures affecting input costs.
Despite sliding on an annualized basis by more than 1 percent, beef and veal prices have been rising steadily month-over-month, including a 1.1 percent increase in January and a 0.6 percent jump in February. The average cost for all uncooked ground beef was $5.21 per pound in February, up by 21 percent from the pre-pandemic price of $4.30.
Live cattle futures have risen by about 3 percent year-to-date on the Chicago Mercantile Exchange.
Although meat prices have eased in recent months, they remain up by 6.8 percent year-over-year. Chicken, ham, and pork are up by 8.8 percent, 8.3 percent, and 1.5 percent, respectively.
Andrew Moran
Author
Andrew Moran has been writing about business, economics, and finance for more than a decade. He is the author of "The War on Cash."
