Domestic availability to decline
Beef availability is forecasted to decline sharply throughout 2023. As a result, domestic per-person consumption is projected 5.6% lower. Beef demand faces headwinds from inflation and greater competition in grocery stores as more pork, chicken and turkey will be available. Looming economic uncertainty does not bode well for restaurant demand, historically during economic downturns consumers cut back on the number of visits to fine dining establishments and swap meat dishes for carb-based options.
Record exports slow amidst a strong U.S. dollar
Despite a historically strong U.S. dollar, 2022 beef exports set a record at $10.8 billion dollars. Chinese beef demand grew 32% throughout 2022 becoming the 2nd largest export destination. Throughout 2023, U.S. beef exports will decrease primarily due to less beef production and some influence from U.S. beef exports being relatively more expensive than other countries, particularly South America.
Winter sales prices have been strong across the Northwest. On Dec. 9, 750 lb. feeder steers in Montana averaged $0.21 per lbs., up 25% from a year ago. Tighter beef supplies have producers optimistic that strong cattle prices will stay. The USDA forecasts fed-steer prices up 8% higher year over year. Improving drought conditions and strong prices have Northwest cattle producers positioned to make a profit.
Feedlots are bullish having experienced some relief from persistent labor issues, but feed costs remain high. Feedlot margins have steadily declined in 2022. While feedlots might have some relief from lower commodity prices in 2023, analysts predict higher cattle prices and inflation will squeeze feedlot margins. Packer margins have also tightened considerably in 2022, and some may experience losses in 2023. If packer profitability is negative, they will likely become more careful buyers, which will place downward pressure for fat and feeder cattle prices.