Beef Demand Keeping Up With Production: Economist

As US pork output exceeds demand and begins to stack up in cold storage, beef demand soldiers on, largely keeping up with increased production, said Scott Brown, livestock economist at the University of Missouri, in an article written for Penton and supplied to Zia by Brown.

Meat production increases over the last few months have been about as expected with growth likely to continue for red meats through at least 2020, Brown said.

“More supply typically means lower prices, and while that has been true to some extent, the last 12 months have seen beef demand strength matching, if not exceeding the rate of output growth,” he said.

 

BEEF PRODUCTION UP 3.3%

 

From July 2017 through June 2018, beef production has risen by 3.3%, Brown said, while pork production is up 2.8%.

However, over the same period, the comprehensive boxed beef cutout has averaged 3.2% above the previous 12 months, while the pork cutout has slipped by less than 1%.  He lauded the red meat demand, saying, “It is no small feat that both the beef and pork industries have upped output while experiencing nearly stable or even higher prices, especially considering that chicken production has grown during this time as well.  It speaks to a willingness of consumers to consume more without receiving a price discount, and is a big win for meat producers.”

 

US STILL THE MAIN BUYER

 

It’s true that some demand strength has come from international markets, but continued strong demand is more uncertain in this time of trade turbulence, Brown said.  But the majority of the additional pounds of meat still are consumed in the US.

Net trade increases in beef accounted for a little more than 20% of the beef production growth in the last 12 months, with pork net trade gains amounting to 25% of the higher output.

From July 2017 to June 2018, the prime boxed beef price increase of 2.5% trailed that of choice, which was up 3.2%, and select, which was up 3.5%, he said.  Even more noteworthy, for the first six months of 2018, prime prices were 3.4% below a year earlier, while choice and select were up a little more than 1%.

 

HAS PRIME RUN ITS COURSE?

 

Then has the growth in consumer demand for prime run its course and now is in a downtrend? Brown asked.  “Nothing could be farther from the truth.”

Volume data provided by the USDA shows that the loads of prime beef moving through the pipeline were up 37% for the first six months of 2018 versus 2017, he said.  This compares with growth of 10% for branded and choice loads and a decrease of 1.6% for select and ungraded product.

It will be necessary to keep demand growing, Brown said.

 

CATTLE, BEEF RECAP

 

No fed cattle sales were reported Wednesday on the Livestock Exchange Video Auction.  A week ago, 851 head sold at an average price of $110.07 per cwt, down from the last sale at $112 two weeks previous.

Cash cattle trade took place Thursday at $110 to $111 per cwt on a live basis in Nebraska, down $3, and at $175 to $179 dressed, down $3 to up $1.

The USDA choice cutout Thursday was up $0.33 per cwt at $206.06, while select was off $0.77 at $198.09.  The choice/select spread widened to $7.97 from $6.87 with 104 loads of fabricated product sold into the spot market.

The CME Feeder Cattle index for the seven days ended Wednesday, was $150.45 per cwt, down $0.11.  This compares with Thursday’s Aug settlement of $149.35, down $1.30.