A combination of mostly steady carcass weights and a projected 5% or more decrease in cattle slaughter will cause U.S. beef production to drop 4.8% in 2013, the second largest year-over-year decrease in 35 years, according to new data from the Oklahoma State University Cooperative Extension.
As a beef production goes down, retail prices will increase.
“It is not really a question of whether retail prices will go up but rather a question of how much and how fast," said Derrell Peel, Oklahoma State University Cooperative Extension livestock marketing specialist. “Beef demand remains the biggest unknown in the beef industry. Time will tell just how severe the squeeze will be on industry margins in 2013."
Peel said many analysts expect the 2013 numbers to be followed by a 2014 decrease of 4.5% or more, and those two years would represent the largest percentage decrease since the late 1970s.
Beef production in 2012 decreased by approximately 1.1% compared to 2011 with a 3.3% decrease in slaughter that was partially offset by a 2.3% increase in carcass weights. However, the effect on consumption of beef does not always match the change in production. Domestic per capita consumption will depend on production levels but must be adjusted for beef imports and exports.
“In 2013, per capita beef consumption is expected to drop 3.5%, less than the production decrease because beef imports will increase and beef exports will decrease," Peel said. “The decrease in per capita beef consumption in 2013 should be similar to the year-over-year decrease in 2011 compared to 2010."
In 2011, domestic per capita beef consumption decreased 3.8%, in large part because of a sharp increase in beef exports despite a minimal decrease in beef production. Beef consumption may drop more sharply in 2014 with a 5% decrease in per capita consumption compared to the lower 2013 level. The decreases in beef production and consumption almost certainly imply higher wholesale and retail beef prices, although other factors will impact the price response to lower supplies.
