What is in this article?:
- What's Ahead For The U.S. Meat Business?
- Scramble for cattle
What’s in store for the U.S. beef industry in 2013? Much of that answer depends on two ongoing factors – the drought and consumer demand for beef products.
Drought and demand will dictate the direction of U.S. cattle and beef markets this year. The impact of the first, on herd size and producer costs, is already largely known. So how beef demand holds up against higher consumer beef prices is the big wildcard for 2013.
Americans’ ability to pay more for beef will largely determine prices for calves, feeder and live cattle. This ability also involves consumers in other countries, as U.S. beef will continue to be some of the most expensive in global markets.
The U.S. beef industry must feel it is in constant crisis mode. From the battle against E. coli O157:H7 starting in 1993 to the first BSE case in the U.S. in 2003, the industry has faced and overcome severe animal health issues. It’s had to adjust to costly new government regulations and endure national and social media attacks that nearly eliminated a legitimate beef product last year.
Drought is a challenge
Now the industry faces a challenge as far-reaching as BSE. The 2010-2011 drought centered in Texas and Oklahoma, and last year’s much more widespread drought, impacted cow-calf producers’ ability to expand their herds. In fact, the national herd on Jan. 1 will be below 90 million head for the first time since the early 1950s. The result is an industry significantly smaller than 17 years ago. It’s startling to realize that the U.S. has lost 14.5 million cattle since 1996. Yet the herd might continue to shrink until 2015.
A Closer Look: Southwest Drought Elicits Dust Bowl Comparisons
This prospect has significant consequences for everyone in the beef chain, from producers to processors to companies that supply products to the industry. The deepest impact, though, will be on consumers. A shrinking supply of domestically produced beef will force retail and foodservice prices higher, and it will likely force end users to be more dependent on imported beef.
USDA’s latest forecasts for available beef supplies (production plus imports minus exports) in 2013 are 54.8 lbs./person, down 2 lbs. from 2012, and down 4.8 lbs. from 2010. Per-capita supplies of pork and chicken will also be down in 2013 from 2012, USDA says.
But the declines are smaller than for beef, which means Americans will continue to eat more pork and chicken and less beef. This has nothing to do with preference; it’s simply a matter of the available supplies of each protein.
The impact of the drought caught the national media’s attention last summer and stories zeroed in on food prices. But the drought’s impact isn’t likely to fully hit consumers until 2013.
The drought will raise the year’s grocery bill for a family of four by $351.12, according to projections by the Food Institute (FI). That’s an increase of about $6.75/week, slightly higher than the 2.5%-3.5% estimated by USDA. Higher grocery bills will be most notable in the meat section where a family of four can expect to pay $44 more in 2013 than in 2012, FI says. USDA forecasts that the retail price of beef will be 5% higher in 2013 than 2012.
Such price advances might seem modest, but they must be put in context. Many Americans are struggling to pay more for beef as the U.S. economy remains weak and unemployment high, economists say. This struggle began in 2008 at the height of the recession and its effects on the beef industry remain to this day.
More than half of all beef is now consumed in some form of ground beef, as it is the only affordable beef item for many Americans. This trend will continue. Both wholesale and retail beef prices were at record levels most of 2012 and beef became less competitive with pork and chicken. This showed up in grocery store sales and is likely to be the trend in 2013, analysts say.