Strong beef demand at home and abroad is what fuels the U.S. beef industry. How sales perform this year will determine everything from packer margins, or lack of them, to price levels for all classes of cattle. This year has begun, as 2023 ended, with cattle producers and feeders firmly in the driver’s seat. This is because the U.S. cattle herd on Jan. 1 was the smallest since 1951.
The number of beef cows was the smallest inventory since 1961 and was down 38% from the historic peak set in 1975 of 45.712 million head. Beef demand in 2023 performed better than expected in the face of food price inflation. But inflation persists and might have a negative impact on beef sales at both retail and foodservice levels.
One of the issues so far this year is that cutout values failed to reach the $300/cwt level until Feb. 23 despite reduced slaughter and beef production levels. Total slaughter for the week ended Feb. 24 was an estimated 4.758 million head. This was down 5.4% or 272,000 head on the same period last year. Beef production at an estimated 3.971 billion pounds was down 4.3% on the same period last year. Yet the weekly comprehensive and Choice beef cutouts have not rallied as expected.
Beef export sales meanwhile have been erratic so far this year. They peaked at 18.3% of total sales the week ended Jan. 26 but fell back to only 8.9% the week before last. Beef exports this year will be smaller than beef imports for the first time since 2020, says USDA’s Economic Research Service. But what might be occurring on the domestic market will be of more concern, say analysts. It remains to be seen if the latest Choice cutout would average more than $300/cwt for the first time this year. Its average the prior week was $294.51/cwt.
Kill levels, especially those of fed steers and heifers, will be an important factor in determining how cutout values perform this month. March is the second weakest month for beef demand after February. The levels will likely remain depressed until cutout values and fed beef margins improve significantly, say analysts.
Margins two weeks ago were negative by $123.16 per head and were negative by $101.15 per head the week before last, according to HedgersEdge.com. The first seven weeks of the year saw only one week with positive margins. This is why kill levels are below expectations.
Beef however performed remarkably well in grocery store sales in 2023, despite consumer concerns about inflation. That’s according to new data released by Circana and 210 Analytics. The data clearly speaks to beef’s continued quality improvement, says analyst Nevil Speer. Ask any consumer about inflation and the first thing they’ll likely mention are food prices, he says.
How does that play out in the meat case, asks Speer. Not like you might think. In mid-January, Circana and 210 Analytics released their 2023 year-end results for retail meat sales. A couple of items are especially significant, he says. Beef’s sales in terms of December monthly sales comps were the clear winner. Total sales were up nearly 5%, while fresh meat sales overall were down. In terms of 52-week comps, beef also generated the largest dollar gains (up 1.6%) across the protein sector, he says.
Now compare chicken’s year-over-year dollar sale comps, says Speer. The dollar increase is directly associated with volume growth. But it was the other way round for beef, more dollars on lower volume. All that speaks to the beef industry’s continued pricing power in the marketplace. That is especially significant given that consumers are especially touchy about inflation. One would expect that consumers would have been more prone to trading down when inflation is front-of-mind, he says.
Why is that occurring, asks Speer. It is because the product continues to get better. The 2022 National Beef Quality Audit’s survey respondents when asked, “What are the strengths of the steer and heifer industry?” reinforced that reality. The responses reveal that product quality gets consistently cited across all categories of industry participants, he says.
Data by the two entities reveal that fresh meat sales for all of 2023 totaled $58 billion, up 0.3% in value and down 1.4% in volume. Beef sales in 2023 totaled $31.2 billion, up 1.6% in value and down 2.3% in volume. Chicken sales in 2023 totaled $15.8 billion, up 1.1% in value and volume. Pork sales in 2023 totaled $6.9 billion, down 5.3% in value and down 3.8% in volume. Beef clearly remains King of the Meat Case. — 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.)
