Despite anticipating record-high calf values, the beef industry will start feeling the pinch of tight fed cattle supplies coming in the next year, according to Kevin Good at CattleFax.
Liquidation caused a 2 percent cow herd decline in 2023, bringing the total U.S. cow herd to 28.2 million head to kick off 2024.
This year, slaughter numbers are expected to decline by at least 700,000, keeping a mild liquidation pace.
Good said heifers on feed approached 40 percent of the total cattle on feed; that needs to be backed off to 36 percent to signal that the heifer population is rebuilding.
Beef-on-dairy will continue to be a significant segment of the fed slaughter population.
“As you think about it, over the next two to three years, because of a higher adaption rate on beef-on-dairy cross in the dairy industry, combined with beef heifer retention, at some point in the future, a higher and higher percentage of our feedlot population will end up being beef-on-dairy cross.”
Despite herd liquidation slowing over 2023, cattle on feed numbers remained elevated throughout the year, totaling 14.4 million head in January 2024, up 2 percent from January 2023.
Good attributes this to high placements due to drought and low heifer retention, increased imports of live cattle from Mexico and slower turnover rates.
“January placements, in our data, are down substantially and are probably going to be down close to double digits when it’s all said and done,” Good said. “You combine that over the next few months, we do anticipate a cattle on feed number that will drop below a year ago as you go from February to March and will remain that way through the remainder of this year.”
Good expects a continued and increasing number of imported cattle from Canada and Mexico, primarily Mexico, to offset lower feeder cattle supplies.
Exports to the top three markets, South Korea, Japan, and China, all declined, and South Korea surpassed Japan as our number one export partner.
“From an export standpoint, last year was disappointing,” said Good. “When it’s all said and done and we get the December numbers out, the raw data is going to be down about 15 percent, just looking at beef.”
With tighter supplies and higher prices, lower exports are expected to continue in 2024, with a projected decline of 5 percent.
Good projected that beef prices are estimated to average $7.90 per pound this year, up 4 percent from last year.
He said beef prices are not likely to go up as quickly as inflation, but since beef prices consistently remain higher, consumers are more likely to be choosy of where to spend their grocery money since pork, and especially poultry prices, tend to be a more economical choice.
“The retailer still sees value in featuring beef during holidays and grilling through the spring and summer. That’s not going to change. But it’s that every other week, instead of getting a chuck roast or a round, you’re going to get a chicken breast or you’re going to get a pork chop.”
Good said taking a closer look at the consumer leads to a better understanding of consumer demand.
Today’s consumer is dealing with inflation rate, 3 to 3.5 percent; higher interest rates, 2 to 3 percent; gross domestic product (GDP), 2 to 2.5 percent; unemployment, 3.5 to 4 percent; historically low savings; Covid-19 stimulus money already spent, record high bills, and high credit card debt.
Good said as long as unemployment stays low, the demand for beef should remain supportive to the market, but there are other cautionary factors like how high the retail price of beef has jumped compared to competing proteins such as pork or chicken.
“We think that we’ve pushed prices hard enough that now we probably have to take a breath in here and let our competition catch up, or let our consumers get used to the higher prices,” he said.
“The message here is pretty simple that more than likely, prices will not go up as fast as supplies go down and inflation rate goes up. And so, academically, demand’s going to look a little softer this year than it has last year, although historically it’s still strong.”
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