Fewer cattle and lower U.S. beef production in the near term

Despite market prices that could reach record highs, the cattle industry is unlikely to expand herd numbers for the next year or two, said analysts, pointing to high feed costs, lingering drought, and a limited labor supply. As a result, Americans are forecast to consume nearly 3% less beef per person this year than in 2023.

The U.S. cattle herd is the smallest since 1951 and the calf crop, the future beef supply, is the smallest since 1940, “which should be bullish for feeder calf prices in the near term and fed cattle prices down the line,” said Jason Franken, an agricultural economist at Western Illinois University. “All things considered, cattle prices in 2024 will likely surpass last year’s records.”

Franken foresaw “a likely prolonged return to industry expansion” compared to the last time the cattle inventory reached its low point in the multi-year cycle of expansion and contraction. “Heifer retention has not yet begun nationwide,” he said on Monday on the farmdoc daily blog. To build the size of the cattle herd, ranchers hold on to breeding stock rather than sell the animals for slaughter.

Beef industry analyst CattleFax said herd expansion would be slow to appear. Cattle slaughter could shrink until 2026. “Over a third of the cow herd was affected by drought in 2023, causing limited heifer retention and more liquidation in some regions,” said Kevin Good, CattleFax vice president of market analysis. “This will limit growth to the cow herd near-term.” Higher beef prices may soften consumer demand at the grocery store but shoppers are willing to pay for high-quality meat, said Good. “Though inflation has moderated, consumer debt and interest rates, cheaper alternative proteins, and economic uncertainty may limit spending and impact purchasing decisions.”

Beef production was expected to fall by 1 billion pounds this year to 25.9 billion pounds. That would reduce per capita beef consumption to 56 pounds per person, said CattleFax analysts at a cattle industry convention last week.

The USDA projects per capita consumption of red meat and poultry at 225.3 pounds this year, one-half pound less than in 2023. Poultry would account for more than half of the total, 116.1 pounds per person. Pork consumption was forecast at 51.4 pounds per person this year. The USDA will update its estimates later this week.

Food is the second-largest consumer expense after housing. U.S. economic growth was forecast at 2.1% in 2024, slightly slower than 2.5% in 2023, said the Organization for Economic Cooperation and Development on Monday. The U.S. inflation rate would be 2.2% this year, compared to 3.7% in 2023, it said. “In the United States, the rundown of excess household savings and strong government spending are projected to moderate in 2024, but lower inflation will strengthen real wage growth and allow policy interest rates to be eased.”