Cattle numbers continue to grow after a long drought depleted the herd

Cattle numbers continue to grow after a long drought depleted the herd.

Beef: It’s still what’s for dinner

Beef back on the menu for U.S. consumers Challenges remain for cattle industry

While no one knows how long it will last, the beef industry is breathing a little easier now that analysts are predicting a moderate rise in U.S. beef consumption in the months ahead.

Indeed, as consumer prices for choice beef cuts continue to trend slightly downward across the U.S., red meat is back on the menu for many Americans, and economists say Texas cattle producers are well positioned to take advantage now that herd numbers continue to grow after the long drought-suppressed years of the not-too-distant past.

According to USDA's latest report, Americans will be eating more beef this year, the first significant increase in beef consumption since 2006. USDA estimates Americans will consume about 54.3 lbs. more of beef per consumer in 2016, up a half pound from the previous year.

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With little argument, the expected move toward more beef on U.S. tables this year can be attributed to stabilizing beef prices across the board. After nearly a decade of cutting back on prime cuts of beef in favor of ground meat, analysts predict consumers are turning back to preferred cuts like pot roast and steak, a trend they believe will continue if consumer prices remain stable over time.

Also fueling the fires of prime cut consumption is a more balanced beef industry. USDA says beef producers have been slow to recover from the devastating effects of drought in recent years but say evidence indicates herd rebuilding efforts are just beginning to pay off.

In Texas, the nation's leading beef producing state, two years of more friendly climate conditions have seen the return of adequate forage to pastures and rangelands and a sharp uptick in a once-troubled hay market.

PROBLEMS REMAIN

But higher demand for red meat and a more stable beef economy doesn't solve all the problems facing the Texas cattle industry. Changing American diets with more emphasis on fresh vegetables and less red meat will continue to work against beef producers, and the potential for volatility in the price of beef as input costs continue to spiral up stand as challenging roadblocks to a faster recovery for the industry.

Stan Bevers, professor and Extension economist for Texas A&M AgriLife Extension Service and one of the leading extension economists in the nation, expects lower prices to continue. At a beef producer meeting in Anderson County, Texas, last week he warned that producers can expect to continue selling livestock at lower prices for the next few years, even though consumer demand for beef is on the rise.

He warns that while this may be depressing for some ranchers who have suffered through recent hard times spurred on by drought, "market prices are notorious for shifting over night."

Anderson County Extension Agent Truman Lamb agrees.

"Different factors can force a different outcome on the market and allow us to see better pricing sooner, or may continue to decrease for an extended amount of time. It's very hard to predict," he told producers.

But Bevers says on the bright side, beef demand continues to build in spite of higher prices. He says it is the combination of what consumers are willing to pay and the stability of beef production in the near term that will determine whether the current uptick in demand will stay the course and continue throughout the remainder of the year.

ECONOMY WILL BE A KEY

External factors, such as how the economy will affect individual consumers, will also influence the balance between cost and demand, and could drive more consumers to or away from higher red meat consumption.

But regardless of an up and down market, economists predict the cost of ground round, which averaged between $6.24 and $9.52 across the nation in 2015, will decline throughout 2016, and that means beef should continue to be in demand by consumers.

"Boxed beef prices declined between May and Oct. of 2015, down more than 20 percent during that period, a result of heavier-weight fed cattle and the increased tonnage. It's not just the number of cattle, but the increased weight," Bevers notes.

Other factors contributing to recent slight beef price declines include lower fuel costs.

"With lower gas prices, consumers have been able to continue to make beef purchases despite record-high retail prices," Bevers says.

While the push in recent years has been for consumers to eat less red meat in favor of pork or poultry, “eating healthy” is not the only driving force behind the success of the U.S. cattle market. Economists say eating healthy is and should be a consideration for every American, but ultimately price will play an important role in consumer behavior.

In other words, overall, the dietary advice about red meat consumption hasn’t changed significantly. What has shifted is the price of beef.

As the droughts in the West, and particularly in Texas, begin to ease, beef production has been on the rise. USDA indicates the latest beef numbers are approaching their highest level since 2011, and with that increase come lower prices.

According to the Bureau of Labor Statistics, ground beef hasn’t been this cheap since July, 2014, though at almost $4 per pound it is still more expensive than pre-drought prices of less than $3 per pound.

TAGS: Livestock
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