While the beef market is “bullish,” an economic prognosticator told those attending the virtual Cattlemen’s Update on Monday morning there are some concerns for the coming year.
Terrain Chief Research Officer Don Close said that didn’t mean there weren’t any hitches in the market.
“Never in all my years have I seen a market that is as structurally bullish as this one and at the same time so challenging to explain,” he said.
The cause of a downturn in the market during the last two months of 2023 may become clearer in February when numbers in January are available, Close said.
“Demand for beef continued to be incredibly solid,” he said. “Consumers came under more pressure from inflation, and we did see it soften a little in November and December.”
Most of that has been on the prime and select meat cuts.
He said one of the issues for the cattle market was on the sales side.
“Retailers were doing a good job of offering beef but not necessarily a good job of selling beef,” he said. “They had a cushion in that margin and given the uncertainties they weren’t going to get themselves in trouble. That’s going to be a challenge as we go into the first quarter of this year, getting retailers to be more aggressive at pricing beef at competitive margin.”
He said that cattle slaughter continues to run above the five-year average for the second year as drought conditions in places like East Texas and Western Louisiana had ranchers reducing their herds.
“The big takeaway here is that weather is still prohibitive in many areas today,” he said. “The availability and price of hay are not encouraging producers. If that weather ever cooperates we’ll see a radical decrease in cattle slaughter.”
He said food plants are increasing capacity, but that so far they are limiting production.
“Saturday slaughter is all but nonexistent and they’re just loping along,” he said. “They are in no way pushing the envelope to harvest fed cattle. We are still in liquidating mode, and we have virtually zero heifer retention as of the present time.”
He predicted there will be more stability in the market during 2024.
“The fundamentals are incredibly good, and consumers have been incredibly loyal in their commitment to beef,” he said. “We need to be more cognizant of the pressure the end users of our product are under and the impact that can have on their willingness to buy.”
Terrain is a partnership between Frontier Farm Credit, American AgCredit and Farm Credit Services of America associations.