Despite a weak U.S. economy, declining supplies of beef will continue to boost beef prices, according to Chris Hurt, Purdue University Extension economist. Hurt previously had forecast a 3% drop in beef production in the first half of the year that would lead to finished cattle prices of $130 per cwt. However, the supply has not decreased that much, he says.
"So far this year, beef supplies have been down close to 1%," Hurt says. "That means more beef than we expected, and more beef is certainly one of the contributors to lower cattle prices."
A weaker U.S. economy, reduced pork and chicken exports and high retail beef prices have also contributed to consumption outlook.
"The weak U.S. economy has many consumers shopping for value and beef has had higher retail price increases as compared with competitive animal proteins," he says. "As an example, retail choice beef prices have been at record-high levels this year, reaching $5.30 per retail pound in the month of March."
Over the past six months, beef prices have risen 6% more than pork prices, 10% more than turkey, 4% more than chicken and 7% more than eggs.
The net effect is more competition for beef. A continued small supply of beef for the rest of the year suggests a brighter future for cattle prices.
"Last-quarter supplies could drop by 6 to 7%, with prices rising into the low $130s," Hurt says. "First-quarter prices for next year should improve a few dollars toward the low- to mid-$130s. These forecasts are all higher than current futures prices."
Ohio beef producers hope to help the situation by rolling a new "Beef. It's What's For Dinner" advertising campaign this month. Funded by the beef checkoff, it will feature a new voice from actor Garrett Hedlund's along mainstays, such as Aaron Copeland's "Rodeo" music.
Ohio Beef Council Chairman Bill Sexten, a cattleman from Washington Court House, says that this new campaign features great photography with a straightforward message. "What better way to celebrate beef month and grilling season in Ohio than with giving beef a fresh and modern look," Sexten says. "We are posed to incorporate this in our promotions and consumer outreach efforts and continue sharing appetizing beef recipes and nutritional information with Ohioans."
If crop yields are closer to normal this year and corn is about $5 a bushel by harvest, those much lower feed prices will stimulate expansion of all animal species. Lower feed prices and improved pasture conditions, cattle producers are expected to retain more heifers. These early stages of herd expansion will draw the beef supply down even more and lead to higher cattle prices.
"This all suggests better days ahead for both finished cattle and calf prices." he says.
Source: Purdue University Extension.