Demand for beef in the US is expected to fall in 2023 as the cattle herd continues to shrink amid severe drought and high feed costs. The resulting high beef prices at grocery stores are forecast to continue shifting consumer demand toward more chicken and pork through the balance of 2022 as well as 2023, according to the US Department of Agriculture’s latest Livestock, Dairy, and Poultry Outlook. I’ve outlined some of the highlights below and included some additional information. The full report is available HERE.
Drought Continues to Impact Timing of Future Marketings – USDA’s Outlook was issued before the October 1 Cattle on Feed report but the same trends are still in place. Not surprisingly, that includes intensifying drought conditions that continue to pull forward the placement of cattle in feedlots. Cattle on feed as of October 1 came in at 99% of the year-ago total, the first year-over-year decrease since December 2021. Notably, the number of heifers in feedlots was up +1.4%, bringing their share to nearly 40% of total feedlot inventories. That’s the highest percentage since at least 2001 and points to ongoing liquidation of the herd. The report also showed placements were down -4% while marketing was up +4%.
Overall, analysts say the Cattle on Feed report suggests that the drought-fueled liquidation that has kept feedlot inventories elevated may have peaked and the US cattle herd is now poised to shrink further. USDA’s Outlook forecasts more cattle being placed in the last part of 2022 and early 2023, in turn reducing marketings in the second-half of 2023. Still, USDA slightly lifted its total 2023 beef production estimate by +30 million pounds to 264 billion, which would be -6% below 2022’s projected production of 28.1 billion pounds.
Larger Placements to Keep a Lid on Feeder Prices in 2022 – Despite firm feedlot demand expected for the remainder of 2022, the fourth-quarter 2022 price forecast for feeder steers is lowered -$4 to $173.00 per cwt. This is mostly due to the continued fast pace of cattle liquidation amid a weaker outlook for winter grazing. The price projection in first-quarter 2023 is raised +$3 to $175 per cwt. However, feed prices are forecast to be slightly higher for the 2022/23 crop year so feeder calf price increases in the second half of 2023 are expected to moderate. USDA lifted its price for fed cattle in fourth-quarter 2022 by +$1 to $148.00 per cwt, while the annual 2023 fed steer price forecast is unchanged from last month at $154 per cwt.
Exports for 2023 Raised on Stronger Demand from Asia – USDA’s Outlook notes that exports in August totaled nearly 324 million pounds, setting a new overall record ahead of last year’s 322 million pounds in August. Further, year-to-date exports through August are at a record 2.4 billion pounds, nearly +6% above last year and +19% higher than the five-year-average. Exports to most markets are higher versus last year, led by China with exports up +30% over last year. The increase in exports to China alone has accounted for 76% of the overall increase. The exceptions include Mexico and Japan, where exports are below year ago levels.
USDA lifted its beef export forecast for third-quarter 2022 by +10 million pounds to 925 million based on trade data showing stronger-than-expected shipments to China. The fourth-quarter projection was unchanged, making the annual forecast 3.571 billion pounds, versus 3.441 billion in 2021. The export forecast for first-half 2023 is also lifted by a total of +65 million pounds. This essentially shifts some exports out of the second half of 2023 into the first half based on higher expected supplies during the fist two quarters. Total 2023 beef exports are lifted slightly higher to 3.070 billion pounds, up from a previous estimate of 3.020 billion.
Imports Increased Amid Higher Global Supplies – US beef imports year-to-date stood at 2.4 billion pounds as of August, +8% above last year and +10% above the five-year-average. Much of that increase comes from Mexico, with US beef imports up +17% in 2022 as of August. Beef imports from Brazil, meanwhile, have dropped off after the tariff-rate quota was filled in the early part of this year. US beef imports from Brazil were -31% in August 2022 compared to last year. As a result, US beef imports for full-year 2022 are forecast slightly lower at 3.389 billion pounds versus 3.414 previously and 3.346 in 2021.
Looking ahead to 2023, USDA expects beef production in Australia and Brazil will increase while China’s imports are forecast lower. The resulting lower demand for global exports is expected to increase available supplies for the US to import in 2023. The first-quarter forecast is raised +30 million pounds to 730 million, the second quarter is raised +70 million pounds to 870 million, and the forecast for the second half of the year is increased +50 million pounds. The projection for total imports in 2023 is increased +150 million pounds to 3.350 billion pounds.