Editor’s Note: This article is part of the Drovers 2024 State of the Beef Industry report, which includes an exclusive survey of cattle producers and their thoughts on numerous topics of importance to the future of their operations. To download the full report, click here.
The dominating theme in 2023’s State of the Beef Industry report was weather. While parts of the U.S. still grapple with dry conditions, the overall situation has dramatically improved versus this time last year, especially in the middle part of the country.
The reprieve has provided producers some opportunity to focus on other parts of the business. The topic that’s foremost of significance is the market — record prices have a way of doing that. Supplies are increasingly tight, but much of the market’s strength is attributed to resilient beef demand. Last year’s per capita beef spending totaled $461 — a new record by $14.
That’s especially encouraging given consumers’ No. 1 complaint about inflation involves food prices. The business is such that consumers have had every opportunity to trade down when it comes to their protein options, but they continue to choose beef, even at higher prices.
Those consumer dollars are flowing back into the production sector. As a result, fed cattle prices have established another set of new highs in 2024. While overall beef production has waned (due to lower cow slaughter), fed beef production has been running ahead of year-ago levels. That is, higher prices on bigger volume.
All of that is a testament to the importance of building, and maintaining, efforts to boost beef demand. The industry’s success toward improved quality and consistency, coupled with meaningful promotion, is paying dividends for U.S. producers.
Battle for Margin
Nevertheless, while fed beef supply has held steady, it’s likely that trend will be pressured in coming years. Beef cow inventory started the year at 28.2 million head. The Jan. 1 feeder cattle supply outside of feedyards was just 24.2 million head, down 5% from 2023 and off 10% from the recent peak of 26.6 million head in 2017.
Therefore, numbers will remain tight in the coming years, and they will be further exacerbated if/when producers decide to hold back heifers to rebuild the cowherd. At that point, the industry is likely to see the peak in prices.
Just how high can prices go? That remains to be seen, but the battle for margin between the feedyard and the packer, and ultimately the retail and food service sectors, will be especially important to watch. In the interim, the cow-calf producer holds the cards and will continue to benefit from solid prices allowing the sector to string together multiple years of unprecedented profits.
Beef On Dairy
Last, but not least, the beef-on-dairy trend continues to influence the industry, proving to be an important contributor to the beef sector. In light of waning beef numbers, these calves will make up a larger share of fed beef in the next several years (as dairy cow numbers remain relatively steady). As a result, many feedyards are working to improve the quality and consistency of their beef-on-dairy supply chains. All of that means increased feedback to suppliers as the calves are easily traceable. Much of that influence will likely creep into the native supply chains.
