CattleFax analysts are firmly predicting beef herd expansion this year, along with record beef prices and a fair amount of consumer "trading down" to chicken from beef.
"The supply side is really driving the market as it is today," analyst Kevin Good said Wednesday morning in the annual CattleFax outlook seminar at the National Cattlemen's Beef Association meeting in Nashville, Tenn.
And yet, Good said, this is not really a problem, at least in the near term. This behavior will only be a part of the market rationing beef usage under high prices.
Put another way, when consumers balk at high prices and substitute chicken, think of it as the market pushing them to select or choose a cheaper protein, but not necessarily driving them to prefer it.
He said real beef demand has been escalating since 2010, evidenced by the fact beef prices have outstripped the levels which economic models would have predicted in this short-supply market.
Good said he expects retail beef demand to be steady to 1% higher this year, reaching 112% of 1998 prices on the USDA retail beef demand index.
However, he added that U.S. consumers – still the biggest market for U.S. beef – have some financial issues which could negatively affect their beef consumption, especially at current high prices. First, U.S. consumers are becoming more diverse ethnically and therefore diverse in their dietary habits. Also, a large number of consumers in the still-weak economy have sub-par incomes and will continue turning away from higher-priced beef.
On the other hand, demand is strong for high-end beef products such as steaks, especially in white-tablecloth restaurants. This segment appears to be driven by consumers whose pockets are lined with record corporate profits.
Overall, the CattleFax analysts are expecting an El Nino weather pattern to return and therefore stocks of feedgrains and forages to continue their rebound. This will produce even lower feed prices and will help all the livestock industries to produce more product to meet demands of consumers in the domestic markets and in the growing global markets for protein.
The analysts said to expect all-fresh beef retail prices of about $5.30 per pound and composite cutout prices of $206 per cwt. Both these would be 7% increases and will be pushed up by further decreases in cattle available for slaughter as herd rebuilding picks up.
A summary of Cattlefax predictions:
Fed cattle: Averaging $135 per cwt.
750-pound feeder steers: Averaging $167 per cwt.
550-pound steers: Averaging $193 per cwt.
Cull cows: Averaging $90 per cwt.
Bred females: Averaging $1,750 per head.
Corn: Averaging $4.10 per bushel and ranging from $3.60 to $4.75.