Cattle futures prices have come off record high levels but should remain strong in 2024 because market-ready cattle supply will be tight.
The price level will also be affected by how well the American and Canadian economies do in the coming year and how secure consumers feel.
I wrote recently about the signs that inflation is getting under control and hopes that central banks will start to ease interest rates by the middle of 2024.
But while the rate of Inflation is moderating, consumers are still shocked by the growth in prices over the past couple years. They are also paying more on interest on their debt and so have less to spend on nonessentials. When at the meat counter or restaurant, they could look for lower-cost protein options.
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This is a change from the last couple of years when North Americans appeared to feel more flush with cash. Coming out of COVID lockdowns, they wanted to treat themselves and had the money to do so. Many used government COVID assistance to improve their financial status.
So beef demand was strong even as the tightening supply of cattle and beef drove meat prices higher.
The supply tightness developed because large parts of North America had been in drought the past few years, causing cow-calf producers to scale back herds.
Pastures dried up and feedgrain prices jumped higher because of the dry weather and because of uncertainties of global supply caused by Russia’s invasion of Ukraine.
The semi-annual census of livestock showed the number of beef cattle in Canada July 1 at 10.3 million, the smallest in decades.
The number of Canadian beef cows, the breeding herd, was 3.655 million, the smallest since 1989.
In the United States, the beef cow herd has not been this small since the 1960s.
Of course, cattle today are much bigger than they were decades ago so the amount of beef produced is larger than decades ago, even though there are fewer cattle.
And although the number of beef steers and heifers going to slaughter fell this year, the decline was partly offset by more cows being slaughtered as cow-calf producers reduced herd size.
For the year to Dec. 2, the number of steers slaughtered was 1.535 million, down eight percent, the number of heifers 900,390, down four percent, and the number of cows 459,412, up eight percent.
Total beef production to Dec. 2, according to Canfax, was 2.526 billion pounds, down five percent.
It is a similar story in the United States, with total beef production to early December at 25.58 billion lb., down 5.2 percent.
The U.S. Department of Agriculture’s December World Agricultural Supply and Demand report forecast that America’s beef production will fall by another 3.5 percent in 2024.
With beef production down in North American and prices up, it is sparking larger imports of beef from other countries, according to Canfax.
In recent months, Canadian beef imports from the United States, Australia, New Zealand, Uruguay, Mexico and Brazil was the largest since 2015.
Canfax said that a recent high for beef imports was 2015, when they accounted for 28 percent of domestic consumption. That fell to 18 percent in 2019.
Analysts and markets will keep an eye on pasture conditions and slaughter statistics in the coming months to see if cattle producers in Canada and the United States start to rebuild herds.
The rebuilding phase will also limit beef production because producers will send fewer heifers to slaughter, instead keeping them as the next generation of breeding animals to expand herds again.
So the amount of domestically produced beef will likely be tight for a few years, providing support for beef prices and cattle prices.
But will consumers continue to shell out for costly meat?
As I noted at the start of the column, beef consumption is linked to consumer spending and confidence.
Even with all the problems of supply chain disruptions, inflation and interest rate hikes of the past year, the U.S. economy has been growing quickly. Growth in Canada has been modest.
In the third quarter Canadian gross domestic product shrank at an annual rate of 1.1 percent, while in the U.S. it grew at a blistering 5.2 percent.
While growth is slower in Canada, it is not in recession yet, and analysts expect fourth quarter GDP to show modest expansion.
While GDP indicates Canada’s economy is in the doldrums and consumers are watching their pennies, Canada’s population is rapidly growing and that might impact beef demand.
Statistics Canada says the population on July 1 was 40.1 million, up an astonishing three percent, or 1.16 million people, over the year before.
Surely some of them are going to eat some beef.
