Nation's cattle numbers lowest since 1951. What does that mean for farmers and consumers?

Dairy farmers don’t always think of themselves as beef producers, but that is the case when their dairy cows “change careers.” Prices for those cull dairy cows are reaching high levels in the current market, based on supply and demand. In the recent cattle and calves report, the USDA said there are 87.2 million head – the lowest such estimate since 1951. And that drives greater demand for dairy’s cull cows.

The inventory of all U.S. beef cattle decreased two percent from a year ago and that decline follows a four percent decrease in the U.S. beef herd from 2022 to 2023. Contrasting with those numbers is the fact that the number of cattle on feed – being fed for the market – has increased two percent from year-ago levels. Experts say that this means there are plenty of cattle to supply the beef market without a dramatic increase in prices. For now, but that will likely change later this year.

But that supply of feeder cattle will likely tighten during the rest of this year. The smallest beef calf crop since 1948, brought on by drought and high feed prices and the contraction of the beef cow herd, along with a significant decrease in replacement beef heifers, means that there won’t be as many cattle to put in feedlots to replace those going out.

Beef supply is dwindling but what about other proteins?

Brenda Boetel, professor and department chair of Agricultural Economics at UW-River Falls talked about the beef market and overall animal protein production on U.S. farms at the Agricultural Outlook Forum in Madison. “This is going to be a much better conversation than I’ve had sometimes in the past,” she said. “In 2023 we saw meat supply down a little bit on the whole – when looked at in the aggregate of poultry, pork and beef – U.S. farmers didn’t produce as much as they had a year earlier.”

Poultry consumption was down among U.S. consumers last year and production was up. There was also an increase in exports. The retail price of poultry was up 3 percent in 2023 relative to 2022. Poultry is still the lowest priced of all of our animal proteins relative to pork or beef, she added.

In 2023 pork production was pretty stable but retail consumption dropped and exports rose. The retail price for pork was down 1.1 percent. With production stable and prices lower, the economist noted that this indicates “pushback” on demand for pork. Even with lower prices consumers weren’t enticed to buy more. Of all the proteins, pork was the segment where demand saw the weakest consumer demand for 2023, she said.

Demand for beef despite prices, exceeds expectations

Though there was a significant decline in beef consumption and the retail price for beef was up 3.9 percent relative to 2022, it was surprising to many market observers that demand didn’t decline more. “Retail consumption of beef surpassed a lot of expectations. The demand for beef is much stronger than what we were expecting,” she said. “We saw significant declines in production of beef, but the fact that we are still consuming as much, means that we are not exporting . . . we’re still keeping a really strong demand.”

That’s one aspect of the protein market Boetel said she is going to watch carefully in 2024 – “is that beef demand going to remain strong?” Economic conditions like the potential for recession or inflation may affect consumer spending and consumer savings. Beef demand tends to be the one that is affected most in the protein marketplace because it is the highest priced of the three.

Last year at this same conference, Boetel predicted that beef demand was going to take a hit in 2023. “Guess what? That didn’t happen. I hope it still doesn’t happen in 2024 but it is something we have to be cautious about – whether or not we’re going to see some pushback on those high prices.”

What will drive meat prices in the year ahead?

The industry saw record prices for beef at the end of 2023. The fresh beef supply hit $7.94 per pound and although those retail prices were high there was still a lot of demand. She said that retail prices in the coming year will be up 4.6 percent while pork retail prices will be down 1.3 percent and poultry will be down 2 percent. The drivers of those prices will be domestic demand underpinned by consumer confidence or uncertainty. Retail beef prices in 2024 are likely to remain stable to very slightly higher.

Boetel said poultry exports are likely to remain roughly the same for broilers in the coming year. But in 2023 there was a huge uptick in turkey exports – up 11.8 percent at 455 million pounds. There were a lot of changes in poultry exports based on avian influenza in 2022 and there was a reset of that industry last year, she said. (This year some countries have banned poultry exports from Ohio and California based on avian influenza outbreaks.)

Assuming bird flu can once again be controlled, she predicted this year’s turkey exports will clock in at about 487 million pounds which would be 7.1 percent higher than last year’s high levels.

Pork exports from the United States were 5.5 percent higher in 2023 at 6.7 billion pounds, and Boetel said that exports in the coming year will likely be at about 6.69 billion pounds. This has to do with lower U.S. prices in relative terms but also due to an increase in U.S. exports going to Mexico. She said 85 percent of Mexican pork imports come from the United States and they were up in 2023. Exports to Japan dropped, but were made up for by the additional shipments to Mexico. “We should hopefully continue to see that in 2024,” she added.

In the beef complex – which is reported by USDA as “beef and veal” – there was a significant decrease from the record exports of 2022, which stood at 3.54 billion pounds. Those exports were down 14 percent relative to 2022’s record mark at 3.02 billion pounds.

The United States imported about 7 percent more beef in 2023 than in 2022. But all beef is not equivalent, Boetel cautioned. “The beef we export and what we import are not the same thing. We tend to export higher-value cuts; we import lean products typically and so they’re not the same thing.”

Supply down, exports drop

What happened is that the U.S. supply is down. “We are just not producing as much beef. Couple that will the strong dollar and we saw that decline in exports,” she said. Japan, South Korea and China are the top three export markets for U.S. beef and exports in those top beef export destinations declined by 17 to 22 percent relative to 2022.

China’s beef imports from the United States were down 22 percent. It is still the third largest export market, taking 17 percent of the U.S. beef that is exported from the United States.

Boetel said U.S. beef production is going to be down again in 2024, so we will continue to see beef exports continue to decline in the coming year. That becomes a bigger concern if the larger U.S. beef buyers end up sourcing their beef from another country and we lose their markets. “That’s an expectation given where our supply is for beef.”

In the poultry market, 2023’s broiler production was up 1.3 percent and the expectation is that 2024 production will be up 2.1 percent. Profitability on the poultry side of the market has a lot to do with how successful the United States is at controlling avian influenza.

In the pork market, Boetel said she expects to see moderate growth in production. Pork production was up 0.4 percent in 2023 and the expectation is that 2024 production will be up 1.2 percent. For 2023, barrow and gilt prices were down 24 percent to an average of $78.34 per hundredweight and for the coming year, she expects that price average to be around $75.74. Larger litter sizes and growth in the breeding herd, according to USDA, should translate into higher pork production.

The concern for pork producers is the variability in the market that’s related to Proposition 12 in California, the farm animal confinement initiative. In order to be able to sell pork in California producers must be able to meet that initiative’s guidelines as to how pork is produced. “That creates a lot of concern because California is the largest state from a retail perspective for demand for pork.”

As the initiative’s guidelines come into force, there will be a market adjustment, she said. The market will need to figure out if pork that can’t be sold in California will go onto retail shelves in other states or on the export market. “That will create a lot of variability and uncertainty within the United States -- at least through 2024,” she added.

Beef producers have not yet started to grow the U.S. beef herd

The statistics from 2023 show that beef producers have not yet started to grow the U.S. beef herd. “We continue to increase our number of cows slaughtered; we still have higher numbers of heifers on feed right now . . . which means we’re not holding back those heifers to begin growing the herd,” she said. “We are continuing to cull and to decline our beef herd.”

She expects beef production in 2024 to be down 5.2 percent and unless the cattle growing regions of the United States get weather that’s conducive to be able to grow those numbers the decline in beef production will continue for at least the next few years. “That plays into those higher beef prices.”

This year, she expects to see the retail price for beef to increase 4.6 percent while exports decline 6 percent and farm production declines 5.2 percent.

Factors that the animal protein market will need to watch include the potential for an economic recession and the value of the dollar, Proposition 12 in California and the various diseases that could affect the market for poultry and swine.