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CME: Per Capita Beef Consumption Expected to Decline

13 February 2020

US - USDA issued its monthly update of supply/demand projections for 2020. If you were looking at this latest report for a hint of the details in the US-China phase 1 deal, then you will probably be disappointed, writes Steiner Consulting Group, DLR Division, Inc.

While USDA did make some revisions to their numbers, the changes did not reflect a major shift in both the supply or demand outlook. Rather, they seem to be driven mostly by nearby trends. Below are some of the key numbers we observed:

Beef: USDA opted to leave its supply projections unchanged as the Cattle Inventory report did not contain any major surprises. USDA is currently forecasting commercial beef production for 2020 to be 27.546 billion pounds, 329 million pounds or 1.2 percent higher than the previous year. This estimate was unchanged from the one published a month ago.

Supply availability is expected to be higher than a year ago in the first half but then decline towards the end of the year. Beef production in Q1 and Q2 is forecast to be up 3.9 percent and 5.1 percent, respectively. This reflects the larger supply of cattle on feed at the start of the year and heavier carcass weights than a year ago.

The smaller calf crop of the last two years is expected to catch up with the beef market in the second half of the year, however, and beef production in Q3 is expected to be down 1.3 percent while Q4 supplies are forecast to be 2.5 percent lower. But production is only part of the story as shifts in global supply/demand often result in more or less product available in the domestic market.

In the case of beef, despite an increase of some 329 million pounds in total supply for the year, per capita consumption is expected to decline by about 1 percent from a year ago. Imports are currently forecast at 2.88 billion pounds, 5.8 percent lower than a year ago. Exports, on the other hand, are currently forecast at 3.3 billion pounds, 278 million pounds or 9 percent higher than last year.

The diverging trends in exports and imports are expected to more than offset the increase in production and result in less beef available in the domestic market. It is also important to recognize that the recovery in US beef supplies from the bottom of the last cycle has been quite modest and per capita availability remains 12 percent below what it was prior to the Great Recession of 2008-09.

While beef prices may appear high, remember that there is significantly less product available to the US consumer and higher prices are needed to ration out the supply. The export outlook from USDA looks aggressive but new trade agreements and the potential for more beef going to China suggest more upside for US beef trade in 2020.

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