U.S. cattle supply up slightly, but beef prices not expected to ease

The next U.S. presidential election may come and go before consumers no longer have to choose between buying a few steaks or making a car payment.

Multiple metrics are at play most of the time help to determine how much consumers will pay for their favorite steak or their next hamburger. It could be investors on Wall Street, corn prices paid by farmers and feeders, demand for exports to Korea and China or higher prices for the limited supply of cattle.

The main catalyst pushing beef prices to record highs last year were low cattle numbers as the national herd hit a 63-year low. However, the shrinking herd trend appeared to reverse. Overall cattle numbers made positive gains rising 1% last year, according to the U.S. Department of Agriculture’s Jan. 1 cattle inventory report.

The report shows the U.S. herd rose to 89.9 million head. Almost all categories of cattle, including heifers, steers, bulls and calves weighing less than 500 pounds, increased. While the overall number is an increase from the prior year cattle census of 88.5 million head, it is still significantly lower than the 25-year peak of more than 103 million head in 1996.

Total cattle and calves in Arkansas decreased by 1% to about 1.64 million head, with several other benchmark numbers remaining roughly the same. While the number of bulls remained unchanged at 55,000 head and the number of calves weighing less than 500 pounds increased from 360,000 to 380,000, the number of adult steers decreased by 15,000 head to 130,000, according to Tom Troxel, head of Animal Science at the University of Arkansas System Division of Agriculture.

While cattle numbers are making a slow improvement, high live cattle prices make it harder for farmers to retain heifers which is necessary in the herd rebuilding process. Troxel said calving rates across the country last year were strong. He expects that will also be the case this year.

EXPORT KINK
Another kink that has recently hit the beef supply chain are delays at West Coast ports related to difficult labor talks between longshoremen and port operators. The American Meat Institute estimates that the port issue costs beef and pork industries $170 million per month.

Higher valued beef cuts that might normally be shipped to South Korea are now being ground up and used domestically, which is helping to bring down beef prices somewhat. This price dip is believed to be temporary for as long as the port issues lag.

Richard Kinder, a butcher and meat manager at Allen’s Foods in Bella Vista, has spent nearly 40 years in the meat business and grocery business. He said wholesale beef prices have dipped a few penny’s per pound from the West Coast port disruption. He said all of last year retailer’s passed along the higher wholesale prices to consumers to the point where less beef was consumed. 

CHICKEN SALES UP
Tyson Foods CEO Donnie Smith said recently that consumers are trading down from hamburger and fresh beef to fresh chicken. He predicted it would happen two years ago when beef prices started rising, but Smith said it just began occurring last fall. This prompted Tyson to add fresh chicken lines in three facilities to meet added demand. 

Kinder said he also has witnessed the chicken push.

“I know my fresh chicken sales are up. I can’t say beef sales are down because we sell a lot of beef. My beef sales are flat to a year ago, but chicken is up,” Kinder said.

He said because Allen’s allow customers to purchase single items of their own choosing like bacon wrapped filets, they still sell a lot of steaks between the $4.50 and $6 range.

“Pork has stayed reasonably priced but it seems shoppers will only buy pork when it’s on sale. At least at Allen’s they are more likely to reach for the steaks or roasts than pork chops and loins,” Kinder said.

Kinder does not expect major changes in retail beef prices this year but he said that could change quickly if there’s a drought this summer or if exports began to flow more freely.

Troxel said the slight increase in cattle supply across the country may take a while to reduce beef prices.

“I don’t anticipate any decline in retail price of meat until 2016,” he said.