Market outlook
What a first half! Can the second half keep up?By David Anderson
It’s been quite a first half of the year in cattle and beef markets. Some new record highs were set in fed cattle markets. Calf prices were almost new records. Record highs were recorded in retail beef prices and consumers continued to buy beef without a lot of signs of significant changes. The second half of the year promises to be just as interesting.
Less beef production Certainly, one reason for higher cattle and beef prices is less production. For the year, beef production is 4.6% below last year. While it is less beef than was produced in the first half of 2022 and 2021, the 13.34 billion pounds produced so far this year is 1.5% more than was produced in the first half of 2019. While it may be a close race with 2018, beef production is on pace to be largest since 2002 (except for 2021 and 2022).
Beef production in 2022 was certainly boosted by beef cow slaughter. This year, total cow slaughter is 4.6% lower than last year. But, that masks the sources of the cows culled. Beef cow slaughter is down 12.3% while dairy cow slaughter is up 5.3%.
Low milk prices are forcing more dairy cows to market. On the steer and heifer side, slaughter is down 3.4%through mid-year. Combined with lower weights, both fed beef and cow beef production is less than last year.
Higher pricesWhile less than last year, beef production has been historically large so far this year. This level of production makes it that much more impressive that fed cattle prices have hit record highs a number of weeks this year.
Fed cattle prices in the $180s have been almost common while some have sold in the $190s per cwt. In the short term, it might be hard to hold those levels as beef production should increase seasonally in the summer. Tighter supplies in the fall should reignite prices.
High prices were shared across the board from calves to the boxed beef cutout to retail beef prices. Even though calf and feeder prices backed off in the last two weeks they remain well above last year. Prices in the Southern Plains for 5-600 and 7-800 pound steers were 45% and 34% above a year ago at the end of June.
The weekly average Choice boxed beef cutout hit $3.39 per pound in June, its highest since August 2021. Retail Choice beef prices, as reported by BLS and USDA, hit $8.08 in May (the latest data) the highest on record eclipsing the old record of $7.90 per pound in October 2021.
The costs of getting beef from where it is produced to grocery store shelves is higher and contributing to record beef prices. But, it is hard to conceive of prices getting this high without some good consumer demand. In spite of plenty of headwinds to consumer spending in the news, folks continue to buy beef.
One big question for the rest of the year is does beef hit a point that causes consumers to significantly curtail buying. To date, that has not happened.
TradeTrade has been a big bright spot for beef for years. Growing exports have added value to beef and cattle. High prices can be expected to pressure export volumes over the next couple of years.
So far this year, beef exports are 9%, or 103 million pounds, lower than last year. U.S. exports to Mexico are up 14%, but exports to every other major market are below last year. Its likely that exports will remain historically large, but it will be hard to hit new record volumes.
Beef imports are 2% smaller than last year, so far. We ought to expect the overall level of imports to grow as our production, especially our cow beef production, declines. High beef prices in the United States will make our market attractive to other exporting countries. While total imports are below a year ago, our imports from Australia, New Zealand and Canada are ahead of last year.
Feed costsFalling corn prices have helped boost calf and feeder prices this year. In the Southern Plains prices have been as much as $2 per bushel lower than the same point last year. USDA’s crop report at the end of June indicated just over 94 million acres of corn planted this year.
That’s a lot of acres and it should continue to push corn prices lower. But, the spectra of drought is growing in the Corn Belt according to the drought monitor. What the increase in acres giveth, drought may taketh away.
Rest of the yearSeveral things are worth paying attention to the rest of the year. Beef demand has been good, boosting prices. Demand is likely the biggest wild card and we’ll see if beef gets to a price point that causes consumers to pause.
The path of drought through the summer is the second big thing to watch. Drought in the Great Plains will make it difficult to expand the cow inventory nationally. Drought in the Corn Belt will lead to higher prices and limit price growth for feeders and calves.
On balance, there’s a lot to be optimistic about.
Anderson is a professor and Extension specialist in livestock and food product marketing in the Department of Agricultural Economics at Texas A&M University.
