As summer wraps up this Labor Day Weekend, we are seeing a drop in beef demand, but with tight cattle supply, the impact might be less severe.
An American Farm Bureau Economist breaks down how low inventory and strong incentives for farmers to sell are shaping the current beef market.
According to Bern Nelson, “To get the forces driving this beef, it is mostly low inventory, and this goes back several years. You know, we’ve been talking about this since 2020, and as these prices have improved, there’s business incentives for farmers to keep selling cattle and that’s kept us contracting or moving along in this contraction phase of the cattle cycle. Now, thinking about this, there’s also a lot of obstacles to growth here, and as long as those incentives are greater than the incentive to keep, we’re going to keep contracting in this phase.”
Even with record-high beef prices this past July, Nelson says that higher meat counter prices do not always mean more money for farmers.
“A farmer will see about 34 cents of every retail dollar comes back to the farmer with regards to beef production, but we’re still not seeing really strong profitability here. That retail dollar does not mean that’s what the farmer makes,” he explains. “The packer is really seeing the largest market share in his scenario, and the farmers has the least control of all ends.”
Consumers might get a bit of a break on their grocery bills in the coming weeks, but you should not expect the prices to drop drastically anytime soon.
The underlying issues are likely to keep them pretty high for a while.
