All wealth that flows to the U.S. beef industry comes from consumers at home and abroad. How much they are prepared to spend on beef largely determines whether packers, cattle feeders and producers make money or not. It is thus extremely important to monitor beef demand at retail and foodservice.
Beef demand was strong throughout 2023 despite an increase in retail beef prices and overall food inflation. Many market analysts believed that demand would begin to suffer this year because retail prices remained at or close to record levels. USDA’s latest monthly retail beef prices showed that its All-Fresh Beef price in May reached a new all-time high of $7.96/lb.
It was up one cent from the April price and was up 6.1% from May last year. Conversely, the May Choice price averaged $8.11/lb., down four cents from April and up only 0.5% from May last year. The record high All-Fresh price in part reflected the high price of ground beef and beef patties.
The industry entered June knowing that the best demand month of the year was behind it. In addition, it faced the start of the so-called dog days of summer, which usually mean a decline in beef sales because high temperatures force more Americans to stay indoors and eat cold cuts rather than grilling outside. The days normally do not start until July. But they came early this year as a blistering heatwave in mid-June extended from the Midwest to New England.
Yet the heatwave appeared not to affect beef sales. It certainly did not impact boxed beef cutout values. The national comprehensive cutout (cuts, grinds and trim) increased the week before last by $6.19/cwt from the prior week. The average of $316.38/cwt was the highest of the year. Also of interest was that the week saw the price of domestic lean manufacturing beef set a new record of $364.14/cwt for sixth week in a row. This was far above the Choice cutout, which averaged $316.19/cwt.
This partly reflects the fact that at the current harvest rate, annual cow slaughter projects to decline by 962,695 head, according to Andrew Gottschalk of HedgersEdge.com. Beef cow harvest this year is estimated to decline by about 516,165 head from last year’s level, he says. It is interesting that to date, there is no decline in year-over-year heifer harvest.
As heifer withholding for breeding begins, this would entail a further reduction in the level of annual beef production and in the available feeder cattle and calf supply for feedlot placement. These factors should lend additional price support to feeder cattle and calves on any price correction, he says.
Another positive in the live cattle market is that packer margins returned to being positive at the start of June after being negative every week this year but one. HedgersEdge.com calculated that margins the week before last were positive by $32.79 per head.
Latest USDA data meanwhile reveals that fed beef processors will enjoy ample supplies of live cattle through the rest of the year. How live cattle prices perform will depend on demand at home and abroad. The industry will be hoping that export sales pick up, as volume so far this year is well below that of last year.
Cattle feeders placed more cattle in their pens in May than expected. The total placed was 2.046 million head, according to USDA’s latest Cattle on Feed report. The total was 4.3% higher than in May 2023 and was 4.9 percentage points higher than analysts’ average forecast of 99.4%. In addition, the three heaviest weight categories accounted for 59% of the year-over-year increase in placements. This means that the bulk of the cattle placed should be market-ready by mid-December, Gottschalk said.
May marketings at 1.955 million head were up 0.2% on last year. The marketing rate (marketings versus cattle on feed) was the highest since 2018. The June 1 cattle on feed total of 11.583 million head was down 0.1% from last year but was 0.7% higher than forecast. The total was 7,000 head lower than a year ago but was the lowest total for the date since 2018.
Front-end fed cattle supplies (on feed 150 days or more) project to remain above prior-year levels through December unless there is a significant increase in the rate of marketings, Gottschalk says. Front-end supplies also project to decline less than the previous five-year trend. In 2024, this category of cattle projects to advance from July-December by approximately 102,000 head. The previous five-year average is a decline of 440,000 head. Cattle on feed supplies will become increasingly front-end loaded, although it is a real possibility that total cattle on feed supplies may decline, he says. — Steve Kay, WLJ columnist
(Steve Kay is editor/publisher of Cattle Buyers Weekly, an industry newsletter published at P.O. Box 2533, Petaluma, CA, 94953; 707-765-1725. Kay’s Korner appears exclusively in WLJ.)
