Tighter Beef Market in 2024 – 05/13/2023

The US Department of Agriculture (USDA) has forecast a drop in the 2024 beef supply. The USDA’s forecast is based on a shrinking cattle herd. The US cattle herd has been declining for several years, and this trend is expected to continue in 2024. This is due to a number of factors, including increased feed costs, drought, and herd liquidations. The USDA’s 2024 forecast also likely assumes fewer heifers moving into feedlots.  

The included scatter studies display the high & low price for finished cattle in the Midwest as a function of the US per capita beef supply. The data points for 2023 & 2024 are based on USDA data for supply and what is implied by the current cash & cattle futures market quotes.

Note that the domestic beef demand curve is in the process of shifting to the right, probably due to general inflation. If we assume beef demand will stabilize through  2024, the USDA’s May 2023 supply forecast assumes a $155/Cwt. to  $200/Cwt. price range for 2024. 

USDA also projects cattle prices. The USDA has forecast a $169 average for live steers in 2023  and a  $172 average for 2024.

Example: The point marked 24-Futures is the point derived from USDA’s May 2024 estimate for  per capita beef supply and the implied 2024 price based on the 2024 futures contracts close on 05/12/2023.

The USDA’s May (preceding year) per capita domestic beef supply forecast & the final data has a 78% R2  and a standard deviation of 2.4 pounds. The data sample was drawn from the years 1996 through 2022.