Senior Farm and Ranch Broadcaster, Ron Hays, is back speaking with Oklahoma State University Extension Livestock Marketing Specialist, Dr. Derrell Peel, about beef demand and packing capacity going forward.
Since before the pandemic, Peel said he has been watching beef demand closely.
“We have been concerned about the potential for weakness there, and it has just remained remarkably resilient through all of this,” Peel said.
Coming out of the pandemic in 2021, Peel said there was an incredible demand for beef. While we have backed off from those levels, Peel said 2022 prices stayed high, and he sees them continuing at those high levels going into 2023.
“We recognize that consumers have a lot of issues on their plate,” Peel said. “Interest rates are rising, they have still got inflation area concerns, and all of those macroeconomic concerns are still out there, and yet it really isn’t affecting beef demand at this point in time, and it doesn’t really look like it is going to at least in terms of what we can see right now.”
While many have predicted consumers would start to trade higher value cuts for a cut of lower priced cuts due to inflation, Peel said, he is yet to see this trend.
“I think there are some adjustments happening, and I think there will be more adjustments as we go forward that comes with the herd liquidation that we have been in,” Peel said. “2022 was an all-time record level of beef production, but that is now coming down. So, there will be less beef, and some producers will get priced out of the market to some extent because there is just not as much beef, so we are not going to eat as much, and we are not going to produce as much.”
At the same time, Peel said it looks like beef demand is remarkably strong, and he doesn’t see any underlying weakness.
“I think the cattle prices and the supply fundamentals are going to continue to push that retail level as high as it could possibly go, and it looks like it could stay at a fairly lofty level at this point,” Peel said.
On the export side of things, Peel said that at the end of 2022, he saw slight adjustments, which he expects to see again due to less beef and higher prices.
“The dollar has come down quite a lot recently, so the exchange rate issues are not quite the challenge they were maybe three or four months ago, but they are still there, so I fully expect we will see beef exports drop back from record levels, but it doesn’t look like there is any broad-based weakness in that market,” Peel said. “I think it is just more kind of the natural reaction to the market situation that we are in at this point, and I think beef exports will remain fundamentally strong, but probably not at record levels.”
Regarding packing capacity, Peel said now that cattle numbers have dropped, packers are going to have to work hard to fill rail space.
“We are trying to bring some new capacity online,” Peel said. “I think the timing is going to be a real challenge for those folks to say the least. It is hard, because it takes a long time to bring capacity online, and you sort of have to look ahead.”
Anything that comes online in the next two to five years, Peel said, is going to face issues due to low cattle supplies.
The Beef Buzz is a regular feature heard on radio stations around the region on the Radio Oklahoma Ag Network and is a regular audio feature found on this website as well. Click on the LISTEN BAR for today’s show and check out our archives for older Beef Buzz shows covering the gamut of the beef cattle industry today.
