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Will better prices help cattle herds expand?

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Will better prices help cattle herds expand?
Mitchell South Dakota 120 South Lawler 57301

BROOKINGS — On the production side of the beef industry, the focus has become whether the nation’s beef cow herd will begin to grow and eventually result in more beef production, said Darrell R. Mark, adjunct professor of economics at South Dakota State University.

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“On the demand side of the industry, such growth could eventually mean an increase in beef consumption. However, even if beef cow numbers are modestly higher at the beginning of 2014, it will likely be 2016 before beef production, and therefore beef consumption, begins to increase,” Mark explained.

In fact, Mark said beef consumption is forecast to decline about 5 percent in 2014 to about 53 pounds per person (retail weight equivalent). In 2015, beef consumption could drop to 52 pounds per person.

The reason beef consumption is declining, Mark said, is because beef production has decreased as cattle feed costs have increased dramatically in recent years. As a result, the reduced quantities of beef available have translated into record beef prices this year. From January through October, the price of all fresh retail beef averaged $4.93 per pound.

“That’s up 5.3 percent compared to the same time period in 2012. In October, the price of all fresh beef set a new record high at $4.98 per pound. Such higher prices, driven by smaller quantities, have many wondering whether consumers will be willing and able to continuously pay more for beef,” he said.

Mark said consumer demand is a valid concern — one that is difficult to project for future years because it involves forecasting changing consumer tastes and preferences. However, available information about beef demand in 2013 — while beef prices were continuously setting new record highs — Mark said would suggest that beef demand has been better than would have been expected.

“A number of factors will determine the demand for beef in the year to come, including consumer tastes and preferences, consumer disposable income, prices of competing meats, general economic conditions in the U.S. and around the globe, and foreign exchange rates,” Mark said. “So, given the strength of domestic beef demand at retail and good export market sales in this last year’s challenging market environment, there is reason to be optimistic about beef demand in the year to come,” he said.

-Source: SDSU Extension

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