Demand Part 2: Beef Demand Determinants

– James Mitchell, Livestock Marketing Specialist, University of Arkansas

Last week, Kenny did an excellent job discussing the price-quantity relationship for beef. This week, I want to focus on factors impacting consumer demand for beef. It’s important to continue last week’s discussion because beef demand will be one of the most important things to monitor in 2023. Supply fundamentals will support cattle prices next year, but there is still uncertainty about what consumer demand will look like, largely reflecting macroeconomic concerns.

The prices of complements and substitutes will affect beef demand. The two main competing proteins for beef are pork and chicken. The first graph above shows average retail meat prices for beef, pork, and chicken. These are composite prices and do not Continue reading

Strong Counter Seasonal Finish to the Year in Process

– Stephen R. Koontz, Department of Agricultural and Resource Economics, Colorado State University

Thanksgiving week is a very slow week for cattle markets. But there are a few much talked about market events that are worth repeating and emphasizing. The feeder cattle and calf movements were light the holiday week. But prices were strong and buyer interest was moderate to good. The summary for Colorado revealed trade of 22 hundred head down from the 26 hundred for the same week last year. Prices for Medium and Large #1 under 400 pounds were greater than $2 per pound while animals between 5-7 hundredweight were $1.65-$1.90 per pound. The heaviest animals were about $1.65. Trading in western Nebraska and Wyoming was similar – volumes even to down about 10% while buyer interest and prices were strong especially for lighter animals.

Hay and forage markets were somewhat similar. Modest volumes with strong interest.  Much of the hay trade in Colorado, Nebraska, and Wyoming – that is not horse hay – is headed out of state and mainly south. Weather from the prior two weeks is resulting in the need to increase hay feeding in both the northern and southern plains. Fair quality hay in Colorado is firmly $300 per ton. And there is some price reporting of trade in corn stalks, mainly in Nebraska, that is Continue reading

Do Beef Prices Drive Consumption or Does Beef Consumption Drive Prices?

– Dr. Kenny Burdine, Extension Professor, Livestock Marketing, University of Kentucky

I open a lot of my Extension programs by showing the retail price chart seen below and discussing general trends in production levels for our three main meats (beef, pork, and chicken). By the end of 2022, pork production is going to be down year-over-year and the increase in broiler production is going to be relatively small. Beef production will actually be a little bit higher than last year, primarily due to very high cow and heifer slaughter. However, that trend is likely to reverse in a big way for 2023 and we should see a reduction in beef production of 5% or more.

As I walk through this discussion, someone in the audience will sometimes ask something like, “given that retail beef prices are already very high, and production is likely to get even smaller next year, will retail beef prices get so high that consumers move away from purchasing beef at the grocery store?” When this comes up, the person asking the question is genuinely concerned that beef could price itself off the average plate. I thought this idea would be worth discussing in this week’s article.

I want to begin by Continue reading

Cattle on Feed

– Matthew Diersen, Risk & Business Management Specialist, Ness School of Management & Economics, South Dakota State University

The expectations before the November Cattle on Feed report were for fewer placements, more marketings, and fewer cattle on feed compared to a year ago. Several analysts expected placements to be down about five percent. The actual placements came in below the average expected as did the actual on-feed total. Feedlots in Colorado and Kansas have on-feed totals sharply lower than a year ago. Texas had a sharp decline in placements compared to last year, and those were uniformly lower across weight classes. Perhaps tight feed supplies are pressuring those feedlots. Idaho and Washington stood out slightly with increased placements compared to a year earlier. Overall, the report would be slightly supportive of nearby fed cattle prices as it indicates tighter supplies of market-ready cattle.

The on-feed situation is a continuation of a couple of longer-run patterns. In the October report the heifer mix in feedlots was reported at 39.7 percent of cattle on feed. This was an increase from a year earlier and from the prior quarter. It was also the highest heifer mix since 2001. The supply of feeder cattle outside of feedlots as of October 1 continued to decline. Note that the supply level outside feedlots was down Continue reading

Cow and Heifer Slaughter Implications for Cattle Inventory

– Josh Maples, Assistant Professor & Extension Economist, Department of Agricultural Economics, Mississippi State University

We are approaching the end of 2022 and are getting a more complete picture of beef cow and heifer slaughter and its implications for future supplies. Through October 29th, heifer slaughter is up about 5 percent in 2022 as compared to a year ago. Beef cow slaughter is approximately 13 percent higher than a year ago. Combined, approximately 765,000 more beef cows and heifers were processed in the first 10 months of 2022 as compared to the same period in 2021.

Trend lines are often useful for forecasts of all types. Shown in the graph above is a regression trend line that was estimated by LMIC using the relationship between beef cow/heifer slaughter and the prior year’s inventory. For 2022, this relationship would be the number of beef cows and heifers slaughtered this year relative to the total inventory of beef cows on January 1, 2022. Or put differently, it is how Continue reading

Lower Retail Beef Prices

– David P. Anderson, Professor and Extension Economist, Texas A&M AgriLife Extension Service

The October Consumer Price Index (CPI) was released last week to a lot of headlines given the importance of the latest inflation numbers. Retail beef prices are included in the CPI and beef is one of the items that has been below a year ago and falling further. Two average retail beef prices are reported: Choice beef and the All Fresh beef. The Choice beef price is an average beef price of USDA Choice quality grade. The All Fresh includes fresh beef of any USDA grade. They both represent a number of different cuts.

The Choice beef retail price was reported to be $7.42 per pound in October. That was 6.1 percent below the record high of $7.90 per pound in October 2021. The Choice beef price was below a year ago for the third consecutive month. The All Fresh average retail price was $7.25 per pound, about 4 percent below a year ago. Prices are typically compared to a year ago because many items exhibit a seasonal trend and beef is no exception. Summer grilling tends to boost ground beef and some steaks. Fall and colder weather tends to boost roasts. And the rib primal gets a boost at the holidays. Over the last 5 years, on average, Choice and All Fresh beef prices tend to peak seasonally during May and June. This year, both exhibited fairly Continue reading

September Beef Exports are Lower Compared to Last Year

– James Mitchell, Livestock Marketing Specialist, University of Arkansas

Last week USDA-ERS published the meat international trade data for September. There was a noticeable decline in September beef exports, totaling 275.78 million pounds or 5.7% lower year over year. September beef imports totaling 258.33 million pounds were 9% below year-ago levels. Declines in beef exports and imports were expected.

Beef imports this year have been below 2021 since June. Beef imports from Argentina, Brazil, New Zealand, and ROW were all down double-digits in September. Imports from Australia and Mexico were both down 4%. Imports coming from Canada increased by 7% in September. Despite declines in Continue reading

Corn Price and Dry Distiller Grain Price Relationship

– Brenda Boetel, Professor, Agricultural Economics, University of Wisconsin-River Falls

Corn price and Dry Distiller’s Grains tend to move in the same direction. There are years where this is the exception, including 2017 and 2020. When examining weekly Kansas City corn price data and 10% Dry Distillers Grain price data from May 2006 to March 2022, the correlation between the two prices series is 0.86, indicating DDG and corn prices tend to move in the same direction.

A regression analysis using the data was conducted to find which price series indicated a relationship with DDG. Weekly high protein Kansas soybean meal price, Kansas corn price, a weekly variable indicating seasonality and a variable indicating year were included in the analysis. The model showing the best fit, with 81% of the DDG price variability explained included all the variables. The results indicate that when Kansas City corn price has a 1% change, the Kansas DDG price will change by 0.77%. Therefore, a $0.10 change in 2021 Kansas City corn price per bushel results in a $1.82 change in Kansas DDG price per ton. These results are similar, although slightly less variable, to what Michael Langemeier found using the Central Illinois prices.

Looking forward into 2023 to determine Continue reading

Applying the Concept of Relative Age Effect to Our Calf Crop

– Pedro L. P. Fontes, Ph.D. Assistant Professor and Extension Specialist

Simple concept: the earlier they’re born the more pay weight there will be.

The Relative Age Effect is a term commonly used to describe how child athletes born early in the academic year tend to perform at a higher level than those born later. For example, softball athletes born between May and August are 40% more likely to play college softball compared with players born between September and December. Similarly, hockey players born between May and August are 56% more likely to play in college compared with athletes born between September and December. This disadvantage can likely be explained by the fact that those who are older are typically more physically, emotionally, or cognitively developed than those that are younger.

Interestingly, similar differences are observed when we evaluate performance records of our calf crops. Steer calves that are born in the beginning of the calving season have more time to gain weight between calving and weaning compared with steers born later in the calving season. Consequently, these steers are heavier at weaning compared with their counterparts. Research from the University of Nebraska indicates that steers born in the first 21 days of the calving season were 32 pounds heavier than those born in the . . .

Continue reading Applying the Concept of Relative Age Effect to Our Calf Crop

Consider Pasture, Rangeland, and Forage Insurance as a Risk Management Tool

– Dr. Kenny Burdine, Extension Professor, Livestock Marketing, University of Kentucky

The most recent drought monitor, released on October 27th, shows the majority of the United States dealing with drought or abnormally dry conditions. While I hope some of those regions received some much needed rain recently, I do think this presents an opportunity to discuss Pasture, Rangeland, and Forage (PRF) Insurance. PRF insurance provides an opportunity for producers to purchase rainfall coverage for perennial forages used for pasture and / or hay production. James provided an introduction to PRF insurance in the April 11 and May 2 newsletters. Since James went through PRF insurance in detail back in the spring, I am just going to focus on three reminders for producers as they consider PRF insurance for the upcoming year.

PRF is a Single-Peril Index Insurance Product
Producers first need to understand that indemnities from PRF are not based on rainfall at their farm, but rather on actual and historical rainfall for a 0.25 degree latitude by 0.25 degree longitude grid, where their farm is located. Daily rainfall for each grid is collected through NOAA weather stations and Continue reading