Domestic meat demand still high, despite record supplies
High domestic meat demand is moving product just about as fast as United States producers can raise it, according to Texas A&M AgriLife Extension Economist David Anderson. Anderson spoke about livestock trends during a June 6 webinar with cattlemen, hosted by the Extension service.
This year cattlemen are heading for what’s shaping up to be record beef production. At 27 billion pounds and more beef to come, this could wind up being the most beef ever produced in U.S. history, he said.
Despite record production and seasonal beef production picking up steam, prices are remaining steady due to demand by consumers that’s cushioning that added production.
“I argue we’re in a period of beef demand, the best in 25 years,” Anderson said. “I would argue that the last four to five years we’ve seen the best demand conditions domestically and in our export markets too.”
And, it’s not just beef, but record pork and chicken production means total meat supplies are increasing. That’s added competition for the range cowman.
The Jan. 1 U.S. cow inventory was 31.8 million head, up 1 percent from last year, with dairy cows accounting for 9.4 million of that. Anderson said the U.S. beef herd rebuilt after the drought in 2014 and 2015. However, we’re going on the second or third year of difficult financial conditions in the dairy industry. And that’s driving more dairy cows to market from herd reductions and bankruptcies.
In Texas, though, cattlemen culled 20 percent or about 1 million cows from the state because of drought in 2014 and 2015. And they’ve been slow to rebuild those herds to pre-drought levels.
“That just highlights the effects of a severe drought out here,” Anderson said. “It’s affected what we think about in terms of stocking rates or carrying capacity of our rangelands. And we converted some of that land to other uses, like hunting, recreational or even urban sprawl.”
With more dairy cows headed to slaughter, we’re seeing ground beef supplies rising, Anderson said. “From March to April we saw 70,000 to 75,000 head go to slaughter,” he said. “With low milk prices we saw about 58,000 head this week. You have to go back to the 1980s dairy buyout to see slaughter numbers this big. A big portion of the increase in cow slaughter numbers is driven by this dairy side.
“Honestly, with lower calf prices and the implication of lower profitability of cattle production, more cows may go to market than did a year ago,” he said.
With Southern Plains slaughter cow prices swinging from 45 to 50 cents per hundredweight, cattlemen may rethink taking those cows to market this summer, and instead wait and see if the dairy cow culling slows.
While there’s been a seasonal increase in the number of 500- to 600-pound steer calves this spring, there’s been a sharp decline in prices in the last six weeks.
“Falling fed cattle prices happen seasonally,” Anderson said. “But, a good share of that is related to corn prices going from under $4 a bushel to $4.60 in the last three weeks.” Significantly fewer acres getting planted in the Corn Belt this year because of weather will trickle down and hurt the cattle feeder in the wallet at harvest.
Typically the summer sees more cattle going to market, but the end of May saw 360,000 to 365,000 head of steers to market, the highest weekly total in several years.
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The first quarter of 2019 saw about 73 percent of the carcasses grading Choice, dropping to just under 70 percent this month. Still that’s above the five-year average and a trend that Anderson pointed out.
“About 25 years ago, with that first Beef Quality Audit, we were going through a period of declining beef demand,” Anderson said. “From an industry point, we had to produce a higher quality, more consistent product.” Genetic improvements in the last 30 years have led to more Prime and Choice grades and that’s what consumers are asking for at the restaurant and the meat case.
The Retail All Fresh Beef Demand Index shows how much a consumer is willing to pay for beef at a given price. Anderson said the index shows consumers are willing to pay a higher price because they are seeing better quality on their plates.
U.S. beef and veal exports in February were right at about 200 to 225 million pounds, below a year ago. Anderson said the overall trend he sees is that U.S. cattlemen are finding and opening more markets, but they have a couple of things to overcome.
“We have a stronger dollar versus most of our competitors, and so that pulls exports back a bit,” he said. “And, we can’t avoid the tariff issue. Most of our retaliatory tariffs are more important on the pork side, but it’s still an important factor in what’s going on here in our export picture.”
Specifically, Anderson said that tariff effects can most be seen in the steer hide and offal value on a live animal basis.
“Over the five-year average, that value was $12.50 to $13.50 per hundredweight,” Anderson said. “Last year, that was $9.50 per hundredweight. This year it’s below $8.50 per hundredweight.” Those hides are sent to Asia, where they go into tanneries that are turned into the leather that we import back here in the form of car seats and high-end merchandise, Anderson explained. But, those retaliatory tariffs hit all agricultural products and hides were one of the first areas to see the pinch.
Additionally, China over the last several years has cracked down on its tanneries to comply with environmental regulations and that’s putting smaller tanneries out of business and cutting demand even further.
“That’s roughly $5 per hundredweight, or about $70 per head lower value in a fed steer because of the value of the things we don’t think about here,” Anderson said.
The African Swine Fever epidemic in China created a jump in hog prices in just six weeks, from 45 cents per pound to just over 80 cents per pound, Anderson said.
“There are estimates that they have had to slaughter or euthanize 25 percent of their hogs, which is more than what we produce in the whole U.S.,” he said. China needs pork, and even with tariffs put on U.S. pork, hog prices are still competitive with the global market.
And, because of the situation in China, Anderson said you’ll see more U.S. restaurants and companies locking in their pork prices and their supplies now before prices zoom higher.
“Most of the volatility in meat markets is trade related,” Anderson said. “Today we export 11 percent of our beef, 23 percent of our pork, 18 percent of our chicken and 15 to 20 percent of our milk products. Twenty-five years ago we didn’t export enough to matter to price. This growth of export markets means trade and exports matter a huge amount on all species. And that’s going to continue to be a major source of turmoil and volatility.”
Jennifer M. Latzke can be reached at 620-227-2807 or [email protected].