Meat Markets May Test Beef Demand Elasticity

The latest estimate of quarterly US red meat and poultry production through 2023 indicates the markets will retest beef demand’s elasticity through the period.

Investopedia defines price elasticity of demand as “a measurement of the change in consumption of a product in relation to a change in its price.”  Beef’s price elasticity will be tested as production declines, which will tend to push prices.

Quarterly red meat and poultry production was expected to rise through the first half of 2023 before beginning to decline in the last half.  But, while beef production was expected to be down from previous quarters, production of pork and poultry could provide consumers with alternate proteins.

LMIC economists used data from the USDA’s National Agricultural Statistics Service for their quarterly production estimates through 2023.

 

TOTAL MEAT, POULTRY PRODUCTION

 

Quarterly red meat and poultry production was expected to exceed the year-earlier quarter through the second quarter of 2023, the LMIC said.  Total production for this quarter was forecast at 26.692 billion pounds, up 147 million, or 0.55%, from the 2021 quarter production of 26.545 billion.

The 2016-2020 average of total first-quarter red meat and poultry production was 25.117 billion pounds, making this year’s forecast first-quarter production up by 1.575 billion, or 6.27%.

The 2023 first-quarter red meat and poultry production estimate was 27.028 billion pounds, up from the 2022 estimate of 26.692 billion by 336 million, or 1.26%.

Second-quarter 2022 total red meat and poultry production was estimated at 26.445 billion pounds, up 126 million, or 0.48%, from the 2921 quarter’s 26.319 billion, but 285 million, or 1.07%, less than the 2023 production estimate of 26.730 billion.  It also was up from the 2016-2020 quarterly average of 24.889 billion pounds by 1.556 million, or 6.25%.

The difference begins in the third quarter of 2023 where total production was forecast at 26.710 billion pounds, down 158 million, or 0.59%, from the 2022 quarter of 26.868 billion.  But, the 2023 third-quarter estimate was up 162 million, or 0.61%, from the 2021 quarter of 26.548 billion and up 958 million, or 3.72%, from the previous five-year average of 25.752 billion.

 

BEEF PRODUCTION ESTIMATED LOWER

 

Declining beef production, however, was expected to be more dramatic, even dipping below the 2016-2020 average in the third and fourth quarters of this year.  In fact, first-quarter 2022 beef production already was expected to be below the 2021 period.

First-quarter 2022 beef production was projected to be 6.769 billion pounds, down 126 million, or 1.83%, from the 2021 quarter of 6.895 billion although still up 359 million, or 5.60%, from the previous five-year average of 6.410 billion.

 

CATTLE, BEEF RECAP

 

The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $139.22 to $140.56 per cwt, compared with last week’s range of $135.28 to $137.27.  FOB dressed steers and heifers went for $212.57 to $218.25 per cwt, versus $211.86 to $215.04.

The USDA choice cutout Tuesday was up $0.79 per cwt at $266.82, while select was up $0.33 at $259.23.  The choice/select spread widened to $7.59 from $7.13 with 128 loads of fabricated product and 32 loads of trimmings and grinds sold into the spot market.

The USDA reported Tuesday that basis bids for corn from livestock feeding operations in the Southern Plains were unchanged at $1.35 to $1.45 a bushel over the Mar futures and for southwest Kansas were down $0.05 at $0.35 over Mar, which settled at $6.09 1/2 a bushel, up $0.20 1/4.

The CME Feeder Cattle Index for the seven days ended Friday was $162.35 per cwt down $3.00.  This compares with Tuesday’s Jan contract settlement of $162.67 per cwt, down $3.57.