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Plentiful Beef Supplies to Weigh on Prices Into 2023, Gro Analysis Shows

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US food prices continue to rise overall, but one exception has been beef. Wholesale prices for beef primal cuts have barely budged since the spring, and plentiful beef supplies should continue to keep a lid on prices into 2023, according to a Gro analysis. 

Inventories of beef are brimming. Cold storage quantities, at record levels, are running 15% above the 10-year average for July (and 27% higher than a year ago). Those plentiful supplies are the result of ranchers shrinking their herds at an unusually fast clip, delivering more beef to markets and exerting downward pressure on prices. 

The accelerated herd shrinkage comes as ranchers liquidate their inventories in response to dried up pasture in drought-hit Western states and the highest feed costs in years. Gro's Beef Cattle Feed Index, part of the Gro Custom Price Index application, shows cattle feed costs have come down from their peak in April as grain costs have dropped, but they are still up 32% in September from a year ago.  

Gro’s Beef Cattle Feed Index, part of the Gro Custom Price Index application, shows cattle feed costs have dropped from a peak in April as grain prices eased, but still remain close to their highest levels in years.

Beef prices eased this past winter from their COVID-recovery highs after ranchers prepared more cattle for slaughter late last year, as Gro wrote about here

  • Those cattle, which were fattened on feedlots over the winter, increased beef production as they came to market and drove beef prices below year-earlier levels by April.  
  • While still 16% higher than the 10-year average, beef prices since mid-February have exhibited the lowest volatility since the outbreak of the pandemic. 

The US beef cattle population, at 56.6 million head, is down 2% from a year ago, and is 12% lower than its most recent peak in 2019. Although the herd size normally rises and falls in cycles, the latest downturn is 12% faster than normal. 

  • The faster pace has resulted in federally inspected slaughterhouses producing more than 50 million pounds of additional beef a week compared to the same periods in the three years prior to the pandemic. 
  • The pipeline remains full, with record-setting feedlot populations through the first half of 2022. 
  • Year-to-date feedlot populations are 7% above the 10-year average.

View a display from the Gro Portal with an overview of the US beef herd, including stocks, prices, cattle on feed and cold storage quantities, and slaughter rates. 

Gro’s analysis of beef price trends sought to determine how long the US cattle herd would continue to shrink at an accelerated pace and thereby build storage inventories. 

  • The analysis assumed the herd would shrink until it reaches the level of 2014, the bottom of the last downcycle for the cattle population. 
  • Assuming the same pace of shrinkage seen so far this year, herd liquidation will level off in six months, taking us into the first quarter of 2023, Gro’s analysis showed.  

But even as herd liquidation exerts downward price pressure, other factors are working to push prices higher, with the result that beef prices have largely flatlined since spring. 

  • Record high beef exports, to Mexico and Asia, are lending support to US beef prices. 
  • So are lofty chicken prices, which encourage consumers to flock to alternative proteins, such as beef. 
  • And with overall food prices continuing to rise, beef prices get caught in the updraft. Gro’s US Food Price Index shows new gains in August from the previous month, and an increase of 15% from a year earlier. 

The balance of forces that have kept beef prices steady in recent months, despite overall food price inflation, could be upset at any point by external forces. But given the continuing downward pressure on prices from heightened beef supplies on the one hand and strong consumer and export demand, as well as broad inflationary forces on the other, beef prices are likely to remain subject to competing pressures at least into next year. 

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