Beef demand, cattle inventory down
Worldwide economic conditions have decreased the demand for beef at a time when cattle inventory numbers have reached a 50-year low, according to University of Nebraska-Lincoln Extension beef and economic specialists.
The overall cattle outlook for 2009 and beyond raises concerns on the demand side rather than the supply side, said Darrell Mark, extension livestock marketing specialist.
Brad Lubben, public policy specialist in the Department of Agricultural Economics, said the desire for high-level protein has not disappeared, but the ability to buy it has for many people.
"It is clear that many consumers, both domestically and internationally, have traded down in their protein purchases," Mark said. "In some cases this means fewer table cuts of beef and more hamburger sales. In other cases, it may mean more substitution away from beef to pork or poultry."
This decline in purchasing of more expensive cuts of meat comes at a time when the nation is seeing low inventory numbers for cattle. Total inventory right now in the United States is 94.5 million head, which is the lowest since 1959, Mark said.
Imports from Canada have dropped dramatically since the fourth quarter of 2008, Mark said. Feeder cattle imports since Oct. 1 are running 48 percent lower than year-ago levels and fed cattle imports for slaughter are 38 percent lower.
Part of the reason for this decline in imports can be attributed to the recently-enacted Country of Origin Labeling law, or COOL, Lubben said. COOL requires meat and other products sold at retail to carry labels indicating its country of origin.
Secretary of Agriculture Tom Vilsack has proposed making the mandatory law voluntarily stronger, which would require more segregation of animals at the processing stage, Lubben said.
For example, consumers now can commonly find a mixed label on meat indicating it may have come from the United States, Canada or Mexico. Vilsack wants stricter standards on those labels, identifying the meat based specifically on which countries it came from. That would include a majority of meat that could be labeled as a product of just the U.S. because it was born, raised, harvested and processed wholly in the United States. Vilsack has warned that if this is not done voluntarily, efforts may be made to change the rule.
"If we demand a more strict label, we'll have to deal with more segregation costs," Lubben said. "At the same time we're battling stresses on consumer demand, we're also implementing rules that would add significant costs to the marketing system."
Because of the potential for added segregation costs, some processing plants are refusing to accept imports, Mark said.
While this is being seen more on the pork side than the beef side, it has big implications for livestock and crop producers in Nebraska, Mark said.
"It reduces the demand for corn, it reduces the number of livestock able to be fed in a major cattle feeding state and it reduces the number of livestock slaughtered," he said. "Nebraska is the number one red meat slaughterer in the country and our slaughter capacity in the United States is built on having Canadian livestock."
COOL aside, the economy is the main factor concerning cattle producers. Cattle prices are languishing in the mid $80s per hundred weight rather than $90/cwt or better, which is what many expected before the economic collapse last fall, Mark said.
The fact that the economy is a problem worldwide not only is reducing the demand for higher valued cuts of beef but also for other parts of the animal. The value of cattle byproducts including the hide, tallow and edible offal products such as beef tongues that are popular in other counties have dropped by more than 50 percent since last summer, Mark said.
For example, the value of a steer hide has dropped from $75 to about $35 because the decline in automobile manufacturing reduces the need for leather seats. Also, fewer people are buying expensive leather shoes, he said.
The timing for a turnaround is uncertain, but when the economy improves cattle markets will improve quickly and fairly dramatically, Mark and Lubben said.
"There will be a period of time that will be quite positive for the cattle industry. It's just a question of when do we get there," Mark said.