Beef Demand

steers (800 lbs.) to average $195/cwt. with a range of $175 to $215/cwt. Steer calves (550 lbs.) are forecast to average $225/cwt., with a range of $200 to $245/cwt.

“Drought affected nearly half of the beef cow herd over the last year, exacerbating the liquidation in 2022,” Good says. “Drought improvement and higher cattle prices should drastically slow beef cow culling through 2023.”

Good forecasts utility cows at an average of $100/cwt. with a range of $75 to $115/cwt. CattleFax projects bred cow prices at an average of $2,100 per head for load lots of quality, running age cows; a range of $1,900 to $2,300.

Likewise, in the January Livestock, Dairy and Poultry Outlook, USDA’s Economic Research Service (ERS) increased projected feeder steer prices (750-800 lbs., Oklahoma City) for the first two quarters of this year, based on more November feedlot placements than expected, and tighter anticipated supplies available for placement early in 2023.

ERS increased the projected first-quarter price by $5 to $182/cwt. and the second-quarter price by $2 to $192. Projected prices are $214 in the third quarter and $224 in the fourth quarter for an annual average of $203.

On the other side of the scale, ERS increased the expected annual five-area direct fed steer price for this year to $159/cwt., in the February World Agricultural Supply and Demand Estimates (WASDE). Prices were forecast to be $158 in the first quarter, $159 in the second quarter, $157 in the third quarter and $162 in the fourth quarter.

Prices were raised on expected strength in first-half demand for fed cattle in the face of tightening feedlot numbers.

ERS increased projected beef production for this year by 50 million pounds to 26.49 billion pounds. That would be 1.8 billion pounds less (-6.3%) than last year’s projected total.

“Slaughter is raised for the first quarter but is partly offset by lower carcass weights as cow slaughter is larger than previously forecast,” ERS analysts explain. “For the second quarter, steer and heifer slaughter is lowered as fourth-quarter 2022 placements were lower than expected, implying fewer animals available for marketing in the second quarter. Lower fed cattle slaughter, coupled with lower average carcass weights, more than offsets higher expected cow slaughter.”

As for corn prices, the WASDE pegs the season-average received by producers at $6.70/bu.

However, Murphy sees price and basis relief on the horizon. Although CattleFax projects planted corn acres this year similar to 2022, Murphy says trend-line yields and increased harvested area suggest new-crop corn prices in the range of $5.00-$5.50.

Strong Beef Demand Continues

Last year, per capita beef supplies were the largest in 12 years. Yet, Good points out retail beef prices were record high on average. “Beef demand remains historically strong,” he says.

More than two-thirds of consumers reportedly eat beef on a weekly basis, or more, according to the recent Today’s Beef Consumer report from the National Cattlemen’s Beef Association (NCBA), a contractor to the Beef Checkoff.

“During the pandemic consumers were forced to cook at home and many have continued to do so as it has become a popular way to make a dollar stretch and combat inflation,” according to the report. It found 76% of meals are now cooked at home and 94% of consumers who are cooking more at home say they will continue to do so.

“In 2022 fresh ground beef accounted for 50% of volume of beef sales, likely due to the lower price point as well as a renewed consumer interest in comfort foods and nostalgic recipes, like meatloaf,” according to the report. Report analysts explain inflation is top of mind with 78% of consumers noticing an increase in the price of food whether at retail or foodservice. However, beef has experienced far lower levels of inflation when compared to other proteins in the “food at home” category.

As for food service, beef sales in both dollars and volume rebounded to surpass the pre-pandemic level of 2019.

International demand for U.S.

beef remains stellar, too. U.S. beef exports set annual records for both volume and value in 2022, according to year-end data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

“2022 was a ground-breaking year for U.S. beef’s international presence, with global demand stronger than I’ve seen in all my years in the industry,” says Dan Halstrom, USMEF president and CEO. “Late in the year, exports certainly felt the impact of persistent headwinds in our large Asian markets, including depressed trading partner currencies and COVID-related challenges in China, but the long list of countries in which records were set showcases the industry’s focus on diversifying export markets. While the year ahead will be challenging due to supply constraints, the exchange rate situation has improved and we still see room for growth in the foodservice sector as more regions continue their gradual rebound from COVID.”

U.S. beef exports reached 1.47 million metric tons in 2022, up 2% from the previous high in 2021. Export value climbed to a record $11.68 billion, up 10% from 2021 and nearly 40% above the previous five-year average. The U.S. exported a record share of its record-large beef production in 2022, and at higher prices.

Beef export value equated to a record $447.58 per head of fed slaughter in 2022, up 10% from the previous high achieved in 2021.

“With drought forced placement and culling, beef production was record large in 2022 at 28.3 billion pounds. Expect production to drop over the next several years – declining 4% to 5% in 2023 to 27 billion pounds,” Good said. “The decline in production in 2023 will lead to a 2.2-pound decline in net beef supply to 57 pounds per person.”

Bottom Line

Despite the headwinds, Zimmerman believes U.S. cattle numbers can recover during the next cattle cycle and challenge the recent beef cow inventory highs near 32 million head.

“But the supply chain should proceed with caution as it looks to the future,” Zimmerman says. “It is going to take time and cooperation to turn recent trends.”

Zimmerman says a culling rate of near 10% is required to stabilize herd size. He expects the culling rate this year to be close to 12%.

“That means the best-case scenario is some level of stabilization arriving in 2024, and the timeline from the previous herd expansion suggests it will take until 2025 or later for meaningful rebuilding,” according to Zimmerman.