The total U.S. cattle herd falls to its lowest level since 1951. Why?
Dairy farmers don’t always think of themselves as beef producers, but they do when their dairy cows “change careers.” Prices for these cull dairy cows are reaching high levels in the current market, depending on supply and demand. In the recent cattle and calf report, the USDA said there were 87.2 million head — the lowest estimate since 1951. And that’s leading to greater demand for cull dairy cows.
The U.S. beef cattle inventory declined 2 percent from last year and the decline follows a 4 percent decrease in the U.S. beef herd between 2022 and 2023. The contrast Along with these figures is the fact that the number of cattle fed to the feed market – has increased by 2 percent compared to last year’s levels. Experts say this means there will be enough cattle to supply the beef market without a dramatic increase in prices. For now, but that will likely change later this year.
But the supply of feeder cattle will likely tighten for the rest of the year. The smallest veal calf crop since 1948, caused by drought, high feed prices and shrinking beef cow herds, as well as a significant decline in the number of replacement beef heifers, means that ‘there won’t be as many cattle to put into feedlots to replace those going out.
Beef supply is decreasing, but what about other proteins?
Brenda Boetel, professor and chair of the agricultural economics department at UW-River Falls, spoke about the beef market and overall animal protein production on U.S. farms at the Agricultural Outlook Forum in Madison. “This is going to be a much better conversation than I’ve had sometimes in the past,” she said. “In 2023, we saw a slight decline in meat supply overall – when you look at all poultry, pork and beef – American farmers did not produce as much as one year earlier. »
Poultry consumption declined among U.S. consumers last year and production increased. Exports have also increased. The retail price of poultry increased by 3% in 2023 compared to 2022. Poultry remains the cheapest animal protein of all compared to pork or beef, she added.
In 2023, pork production was fairly stable, but retail consumption fell and exports increased. The retail price of pork fell by 1.1 percent. With production stable and prices falling, the economist noted that this indicates a “retreat” in pork demand. Even with lower prices, consumers had no incentive to buy more. Of all proteins, pork is the segment with the lowest consumer demand for 2023, she said.
Beef demand, despite prices, exceeds expectations
Although there was a significant decline in beef consumption and the retail price of beef increased by 3.9% compared to 2022, many market observers were surprised to find that demand did not decrease further. “Retail beef consumption has exceeded many expectations. The demand for beef is much stronger than we expected,” she said. “We have seen a significant drop in beef production, but the fact that we still consume so much means we are not exporting. . . we still maintain very strong demand.
This is one aspect of the protein market that Boetel said she will watch closely in 2024: “Is the demand for beef going to stay strong? » Economic conditions such as the potential for recession or inflation can affect consumer spending and saving. Beef demand tends to be the hardest hit in the protein market because it is priced the highest of the three.
Last year at this same conference, Boetel predicted that beef demand would take a hit in 2023. “Guess what? This does not happen. I hope this still doesn’t happen in 2024, but it’s something we need to be careful about – whether or not we see a decline in these high prices.
What will cause meat prices to change in the coming year?
The industry saw record prices for beef in late 2023. Supply of fresh beef reached $7.94 per pound, and while those retail prices were high, demand was still strong. She said retail prices in the coming year would increase by 4.6 percent, while pork retail prices would decrease by 1.3 percent and poultry prices by 2 percent. The drivers of these prices will be domestic demand supported by consumer confidence or uncertainty. Retail beef prices in 2024 are expected to remain stable, or even slightly higher.
Boetel said poultry exports would likely remain about the same for broilers in the coming year. But in 2023, turkey exports increased significantly, up 11.8% to 455 million pounds. There were many changes in poultry exports due to bird flu in 2022 and this industry was reset last year, she said. (This year, some countries banned poultry exports from Ohio and California due to bird flu outbreaks.)
Assuming that bird flu can be brought under control again, she predicted that this year’s turkey exports would reach about 487 million pounds, or 7.1 percent above last year’s high levels.
U.S. pork exports grew 5.5% in 2023, to 6.7 billion pounds, and Boetel said exports in the coming year would likely reach about 6.69 billion pounds. This is due to the decline in US prices in relative terms, but also to an increase in US exports to Mexico. She said 85 percent of Mexico’s pork imports came from the United States and were on the rise in 2023. Exports to Japan fell, but were offset by additional shipments to Mexico. “We should hopefully continue to see this in 2024,” she added.
In the beef sector – which the USDA refers to as “beef and veal” – there was a significant decline from 2022’s record exports of 3.54 billion pounds. These exports were down 14% from a record 3.02 billion pounds reached in 2022.
The United States imported about 7% more beef in 2023 than in 2022. But not all beef is equal, Boetel warned. “The beef we export and what we import are not the same thing. We tend to export higher value cuts; we generally import lean products and so it’s not the same thing.
Supply down, exports down
What has happened is that US supply is down. “We just don’t produce as much beef. Add to that the strength of the dollar and we have seen a decline in exports,” she said. Japan, South Korea and China are the top three export markets for U.S. beef and exports to these top beef export destinations are down 17-22% from 2022.
Chinese beef imports from the United States fell 22 percent. It is still the third largest export market, absorbing 17 percent of U.S. beef exports.
Boetel said U.S. beef production will decline again in 2024, so we will continue to see beef exports continue to decline in the coming year. This becomes even more concerning if the largest buyers of U.S. beef end up sourcing from another country and we lose their markets. “That’s an expectation given where our beef supply is.”
In the poultry market, broiler production in 2023 increased by 1.3 percent and production for 2024 is expected to increase by 2.1 percent. The profitability of the poultry market largely depends on the success of the United States in its fight against avian flu.
In the pork market, Boetel said she expects moderate production growth. Pig production increased by 0.4 percent in 2023 and is expected to increase by 1.2 percent in 2024. For 2023, prices of barrows and gilts fell by 24 percent for reach an average of $78.34 per hundredweight and for the coming year, it expects this average price to be around $75.74. According to the USDA, larger litters and breeding herd growth should result in higher pork production.
What worries pork producers is market variability related to California’s Proposition 12, the farmed animal containment initiative. In order to sell pork in California, producers must be able to meet this initiative’s guidelines for how pork is produced. “This creates a lot of concern because California is the largest state from a retail perspective for pork demand.”
As the initiative’s guidelines come into effect, there will be a market adjustment, she said. The market will need to determine whether pork that cannot be sold in California will be sold at retail in other states or in the export market. “This will create a lot of variability and uncertainty in the United States, at least through 2024,” she added.
Beef producers have yet to begin expanding the U.S. cattle herd
Statistics from 2023 show that beef producers have not yet begun to increase the U.S. cattle herd. “We continue to increase our number of cows slaughtered; we have even greater numbers of heifers being fed now. . . which means we’re not holding back those heifers to start growing the herd,” she said. “We continue to cull and reduce our cattle herd. »
She expects beef production in 2024 to be down 5.2 percent and unless U.S. cattle-raising regions benefit from weather conditions conducive to an increase in those numbers, the decline in beef production will continue for at least the next few years. “This contributes to rising beef prices.”
This year, it expects to see the retail price of beef increase by 4.6 percent while exports will decline by 6 percent and agricultural production will decline by 5.2 percent.
Factors that the animal protein market will need to watch include the potential for an economic recession and the value of the dollar, Proposition 12 in California, and the various diseases that could affect the poultry and pork market.
