Market analysts expressed concern that lingering economic uncertainty and more time away from boosting household finances with stimulus measures could reduce consumers’ willingness and ability to buy meat.
The strength of consumer demand for meat is one of the most important factors in determining livestock prices. The COVID-19 pandemic that began in 2020 and market and government policy actions in the process of returning to relative normalcy have driven consumer meat-buying behavior in recent years. It’s getting harder to see what’s going on.
A study of weekly price trends for six meat products at the wholesale level shows that some of these concerns have come true.
Impact on meat production
The comparison is from early 2022 to mid-May 2023, compared to the average for the same week from 2017 to 2019. (This eliminates the most dramatic short-term effects of the pandemic, and shows how demand for various meat products compares to pre-pandemic levels.)
Production levels are also a key factor in determining market prices, but beef, pork and chicken production did not fluctuate significantly during the study period.
In 2022, U.S. beef production will be 5.8% higher than the 2017-19 average, pork production will be up 1.8%, and chicken production will be up 8.2%. Beef production in Q1 2023 was 6.7% higher than the Q1 production average for 2017-2019, in line with pork (up 6.7%) and slightly lower than chicken (up 12.5%). .
Although relative production levels influence pricing, the differences in supply observed between these species during the analysis period are not large enough to significantly affect price volatility.
Problems with pork
Pig producers are currently struggling most in terms of profitability, in some cases facing their worst returns in 25 years.
Of the six products, pork belly Primal experienced the biggest price drop in recent weeks, and pork loin is also trending downwards. Interestingly, with the exception of pork belly, all other products have maintained their price levels above the 2017-19 average each week since early 2022.
Of some concern to those involved in the livestock industry, the price of raw beef ribs is plummeting by 2023. Raw meat prices for Choice beef shoulder loin are relatively stable, along with composite wholesale chicken prices.
Lack of supply opportunities for beef
Increased production, as noted above, is one of the factors that have helped most livestock producers weather the impact of significant increases in input costs.
The cattle industry has just entered a period of continued decline in beef production. Recent USDA forecasts show that beef production will fall 5.4% in the second half of the year compared to 2022, with a further 8% decline in 2024.
These changes in supply will put upward pressure on cattle prices, even if demand weakens a little more. What the industry must avoid is the sharp drop in demand that the pork industry is currently facing.
So far, demand for beef remains positive, even though consumers tend to hold off on big-ticket purchases when finances get tight.
Brown is a livestock economist at the University of Missouri. He grew up on a diverse farm in northwest Missouri.