Here's why beef is still pricey

A slowing economy may lead to a decline in sales of pricey beef cuts, but don't look for any bargains just yet. The cost of beef is largely determined by the cost of feed, which has been rising.

Here's why beef is still pricey

New York CNN

Slowing economic growth may cause a drop in the sales of expensive beef cuts. But don't expect any deals just yet.

The market forces, which have been building over a long period of time, and include devastating droughts, are likely to keep the price of hamburgers and steaks relatively high.

This is partly because there is less beef. David Anderson, professor at Texas A&M University’s agricultural economics, said that a contraction in beef supply has been expected for some time. We're now starting to see effects we've known were coming for the past couple of years.

Farmers began to sell cattle in large numbers when extreme droughts hit the United States. The dry conditions and higher feed prices made it difficult or expensive to maintain herds. This year, the supply of cattle has been constrained due to a wave of sales of breeding cows.

A March market outlook by the US Department of Agriculture stated that 'tightening of cattle supplies is expected to cause an annual decrease in beef production of a significant amount, the first since 2015.

Anderson said that if we produce less beef then the price pressure will be on to increase. "The big unknown will be the consumer demand."

Lance Zimmerman is a senior beef analyst at Rabobank and he said that the beef supply tends grow and shrink roughly every 10 years. When the supply shrinks, prices for consumers tend to rise. This year is more complex because people are worried about the economy.

Zimmerman stated that the biggest question on all market analysts' minds is whether we are facing a recession that we should price into next year's market. If that is the case, then beef prices could be more stable.

With food prices still high, consumers have already begun to reduce their consumption of certain products, such as beef.

Tyson (TSN), a company that processes a fifth or more of the beef, pork and poultry produced in the United States, has noted a drop in sales for beef during the three-month period ending December 31, 2022.

John Tyson, CFO, said that beef sales were down 5.6% from the record-high sales of the previous year. He noted that the prices had fallen in the first quarter because there was a'softer demand for beef'. The company stated that they expect their beef margins to drop this year due to the reduced domestic supply.

Adam Speck is a senior livestock analyst with Gro Intelligence. As they prepare for the new year, they must answer a key question: Will demand increase enough to justify a price hike?

Speck said, "The answer is likely no." This may not be a big relief as beef prices remain relatively high. According to USDA data, in 2022 fresh choice beef will retail for $7.59 a pound. This is up from $7.25 a pound in the previous year.

Stores might test the water during barbecue season.

Bernt Nelson is an economist at American Farm Bureau Federation. He said that in the spring, "we are at the bottom of the traditional seasonal demand." He noted that the demand for beef usually drops after the holidays and then picks back up in the summer when people start grilling. Bernt stated that if demand is strong, we may see higher prices for beef in the fall or later.